Toggle SGML Header (+)


Section 1: S-4/A (S-4/A)

S-4/A
Table of Contents

As filed with the Securities and Exchange Commission on March 9, 2020.

Registration No. 333-236425

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

Amendment No. 1

to

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

EVANS BANCORP, INC.

(Exact name of registrant as specified in its charter)

 

 

 

New York   6021   16-1332767
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

One Grimsby Drive

Hamburg, New York 14075

(716) 926-2000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

David J. Nasca

President and Chief Executive Officer

Evans Bancorp, Inc.

One Grimsby Drive

Hamburg, New York 14075

(716) 926-2000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

With copies to:

 

Frank M. Conner III
Michael P. Reed

Christopher J. DeCresce
Covington & Burling LLP
One CityCenter
850 Tenth Street N.W.
Washington, D.C. 20001
(202) 662-6000

 

Kevin D. Maroney

President & Chief Executive Officer

FSB Bancorp, Inc.

45 South Main Street

Fairport, NY 14450

(585) 223-9080

 

Eric Luse

Benjamin M. Azoff

Gregory M. Sobczak

Luse Gorman, PC

5335 Wisconsin Ave., N.W.

Suite 780

Washington, DC 20015

(202) 274-2000

Approximate date of commencement of the proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective and upon completion of the merger described in the enclosed document.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐


Table of Contents

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of  “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


Table of Contents

Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This document shall not constitute an offer to sell or the solicitation of any offer to buy these securities, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

PRELIMINARY - SUBJECT TO COMPLETION - DATED March 9, 2020

PROXY STATEMENT/PROSPECTUS

 

LOGO

PROPOSED MERGER — YOUR VOTE IS VERY IMPORTANT

[            ], 2020

Dear Stockholders of FSB Bancorp, Inc.:

On December 19, 2019, FSB Bancorp, Inc., which we refer to as FSB, entered into an Agreement and Plan of Reorganization, as amended on March 5, 2020, which we refer to as the merger agreement, with Evans Bancorp, Inc., which we refer to as Evans, and MMS Merger Sub, Inc., a Maryland corporation and wholly-owned subsidiary of Evans, which we refer to as Merger Sub. Under the terms of the merger agreement, (i) Merger Sub will merge with and into FSB, which we refer to as the merger, with FSB continuing as the surviving corporation in the merger and as a wholly-owned subsidiary of Evans, (ii) immediately following the completion of the merger, FSB will merge with and into Evans, which we refer to as the second merger and, together with the merger, the holdco mergers, with Evans continuing as the surviving corporation in the second merger, and (iii) immediately following the completion of the second merger, Fairport Savings Bank, a New York-chartered savings bank and wholly owned subsidiary of FSB, which we refer to as FSB Bank, will merge with and into Evans Bank, N.A., a national banking association and a wholly owned subsidiary of Evans, which we refer to as Evans Bank, with Evans Bank being the surviving bank, which we refer to as the bank merger and, together with the holdco mergers, the mergers.

Under the terms and conditions of the merger agreement, at the effective time of the merger, each outstanding share of common stock, par value $0.01 per share, of FSB, which we refer to as FSB common stock, issued and outstanding immediately prior to the effective time of the merger, except for specified shares of FSB common stock owned by FSB or Evans (which will be cancelled), will be converted into the right to receive, at the election of such holder, either (i) 0.4394 shares, with such number being referred to as the exchange ratio and such shares being referred to as stock consideration, of common stock, par value $0.50 per share, of Evans, or Evans common stock, or (ii) $17.80 in cash, which we refer to as the cash consideration and together with the stock consideration we refer to as the merger consideration, together with cash in lieu of fractional shares, if any. All such elections are subject to adjustment on a pro rata basis, so that approximately 50% of the aggregate merger consideration paid to FSB stockholders will be the cash consideration and approximately 50% will be the stock consideration.

Although the number of shares of Evans common stock that holders of FSB common stock who receive the stock consideration is fixed, the market value of such shares (and, therefore, the value of the stock consideration) will fluctuate with the market price of Evans common stock and will not be known at the time FSB stockholders vote on the merger.

Shares of Evans common stock are listed on the New York Stock Exchange American, which we refer to as NYSE, under the symbol “EVBN.” Shares of FSB common stock are listed on the Nasdaq Capital Market, which we refer to as Nasdaq, under the symbol “FSBC.” Based on the closing price of Evans common stock on NYSE on December 19, 2019, the last trading day before public announcement of the signing of the merger agreement,


Table of Contents

the value of the stock consideration was equal to $17.79. Based on the closing price of Evans common stock on NYSE on March 5, 2020, the last practicable trading date before the date of the printing of the attached proxy statement/prospectus, the value of the stock consideration was equal to $15.96. You should obtain current market quotations for both Evans common stock and FSB common stock. Based on the number of shares of FSB common stock outstanding (which includes the shares of FSB common stock underlying FSB restricted stock awards and excludes the number of shares of FSB common stock issuable pursuant to outstanding FSB stock options) less the unallocated shares of FSB common stock held in the suspense account of the ESOP that will be delivered to FSB to repay the outstanding ESOP indebtedness and subsequently canceled pursuant to the merger agreement, in each case, as of March 5, 2020, the last practicable date prior to the printing of the attached proxy statement/prospectus, and based on adjustment on a pro rata basis such that approximately 50% of the merger consideration will be the stock consideration, the total number of shares of Evans common stock expected to be issued in connection with the merger is approximately 422,417, and therefore holders of shares of FSB common stock as of immediately prior to the closing of the merger will hold, in the aggregate, approximately 7.87% of the issued and outstanding shares of Evans common stock immediately following the closing of the merger (without giving effect to any Evans common stock held by FSB stockholders prior to the merger). However, an increase or decrease in the number of outstanding shares of FSB common stock prior to completion of the merger could cause the actual number of shares issued in connection with the merger to change.

FSB will hold a special meeting of its stockholders, which we refer to as the FSB special meeting, in connection with the mergers. At the FSB special meeting, FSB stockholders will be asked to vote to approve the merger agreement, and the transactions contemplated thereby, which we refer to as the merger proposal, and related matters as described in the accompanying proxy statement/prospectus. The mergers cannot be completed unless, among other things, the holders of a majority of the outstanding shares of FSB common stock vote to approve the merger agreement. At the FSB special meeting, FSB stockholders will also be asked to vote on a proposal to approve the adjournment of the FSB special meeting, if necessary or appropriate, to solicit additional proxies in favor of the merger proposal. The FSB special meeting will be held at the Perinton Community Center located at 1350 Turk Hill Road, Fairport, New York 14450 on April 20, 2020 at 2:00 p.m., local time. The FSB board of directors has unanimously approved and adopted the merger agreement and the transactions contemplated thereby and recommends that you vote “FOR” the merger proposal and “FOR” the adjournment proposal.

The attached proxy statement/prospectus, which serves as the proxy statement for the FSB special meeting and the prospectus for the shares of Evans common stock to be issued in the merger, includes detailed information about the FSB special meeting, the mergers and the documents related to the mergers. We urge you to read the entire proxy statement/prospectus carefully, including the discussion of the risks related to the mergers, the business of the combined company after the merger and the business of Evans and FSB in the section titled “Risk Factors” beginning on page 36.

Your vote is very important. To ensure your representation at the FSB special meeting, please promptly complete, sign, date and return the enclosed proxy card to FSB in the enclosed postage-paid envelope or by submitting a proxy through the Internet or by telephone as described on the enclosed instructions. If you hold your shares in “street name,” you should instruct your broker, bank or other nominee how to vote in accordance with the voting instruction form you receive from your broker, bank or other nominee.

Sincerely,

 

LOGO

Kevin D. Maroney

President and Chief Executive Officer

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in the merger or passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.


Table of Contents

The shares of Evans common stock to be issued in connection with the merger are not savings accounts, deposits or other obligations of any bank or savings association and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

This proxy statement/prospectus is dated [            ], 2020, and is first being mailed to FSB stockholders on or about [            ], 2020.

 


Table of Contents

LOGO

FSB Bancorp, Inc.

45 South Main Street

Fairport, NY 14450

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

[            ], 2020

To the Stockholders of FSB Bancorp, Inc.:

Notice is hereby given that a special meeting of stockholders, which we refer to as the FSB special meeting, of FSB Bancorp, Inc., a Maryland corporation, which we refer to as FSB, will be held at the Perinton Community Center located at 1350 Turk Hill Road, Fairport, New York 14450 on April 20, 2020 at 2:00 p.m., local time, for the purpose of considering and voting upon the following matters:

 

  1.

A proposal to approve the Agreement and Plan of Reorganization, dated as of December 19, 2019, as amended on March 5, 2020, by and among Evans Bancorp, Inc., which we refer to as Evans, MMS Merger Sub, Inc. and FSB, and the transactions contemplated by that agreement, pursuant to which, among other things, MMS Merger Sub, Inc. will merge with and into FSB, as more fully described in the accompanying proxy statement/prospectus, we refer to such proposal as the merger proposal; and

 

  2.

the approval of one or more adjournments of the FSB special meeting, if necessary or appropriate, to solicit additional proxies in favor of the merger proposal, we refer to such proposal as the adjournment proposal.

FSB will transact no other business at the FSB special meeting except for business properly brought before the FSB special meeting or any adjournment or postponement thereof.

The FSB board of directors has fixed the close of business on March 5, 2020 as the FSB record date for determination of stockholders entitled to notice of and to vote at the FSB special meeting, and only stockholders of record on said date will be entitled to receive notice of and to vote at said meeting.

The affirmative vote of the holders of a majority of the outstanding shares of common stock, par value $0.01 per share, of FSB, which we refer to as FSB common stock, is required to approve the merger proposal. Assuming a quorum is present, a majority of the votes present in person or by proxy is required to approve the adjournment proposal.

The FSB board of directors has unanimously approved and adopted the merger agreement and the transactions contemplated thereby and recommends that you vote “FOR” the merger proposal and “FOR” the adjournment proposal.

Your vote is very important. Whether or not you plan to attend the FSB special meeting, please take the time to vote by completing, signing, dating and returning the enclosed proxy card to FSB in the enclosed postage-paid envelope or by submitting a proxy through the Internet or by telephone as described on the enclosed instructions as soon as possible to make sure your shares of FSB common stock are represented at the FSB special meeting. If you submit a properly signed proxy card without indicating how you want to vote, your proxy will be counted as a vote “FOR” the merger proposal and “FOR” the adjournment proposal. The failure to vote by not submitting your proxy or not attending the FSB special meeting and voting in person will have the same effect as a vote against the merger proposal. Submitting a proxy now will NOT prevent you from being able to vote in person at the FSB special meeting. If you hold your shares of FSB common stock in “street name,” you should instruct your broker, bank, or other nominee how to vote in accordance with the voting instruction form you receive from your broker, bank, or other nominee.

By Order of the Board of Directors,

 

LOGO

Roberta Ryan

Corporate Secretary

 


Table of Contents

ADDITIONAL INFORMATION

Evans and FSB file reports, proxy statements and other information with the United States Securities and Exchange Commission, or the SEC, under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. In addition, this proxy statement/prospectus incorporates important business and financial information about Evans from documents filed with the SEC that are not included in or delivered with this proxy statement/prospectus. You can obtain any of the documents filed with or furnished to the SEC by Evans or FSB at no cost from the SEC’s website at www.sec.gov. You will also be able to obtain these documents, free of charge, from Evans at www.evansbank.com or from FSB at www.fairportsavingsbank.com. The information provided on Evans’ and FSB’s websites are not a part of the accompanying proxy statement/prospectus and therefore are not incorporated by reference into the accompanying proxy statement/prospectus. These documents are also available without charge upon written or oral request to the applicable company’s principal executive offices. The respective addresses and telephone numbers of such principal executive offices are listed below:

 

Evans Bancorp, Inc.

One Grimsby Drive
Hamburg, NY 14076
Attention: Jessica L. Brosius
Telephone: (716) 926-2000

  

FSB Bancorp, Inc.

45 South Main Street

Fairport, NY 14450

Attention: Kevin Maroney

Telephone: (585) 223-9080

These documents are available without charge upon written or oral request. To obtain timely delivery of these documents, you must request them no later than April 13, 2020 in order to receive them before the FSB special meeting.

No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this proxy statement/prospectus. This proxy statement/prospectus is dated [ ], 2020 and you should assume that the information in this proxy statement/prospectus is accurate only as of such date. You should assume that the information incorporated by reference into this proxy statement/prospectus is accurate as of the date of such document. Neither the mailing of this proxy statement/prospectus to FSB stockholders nor the issuance by Evans of shares of Evans common stock in connection with the merger will create any implication to the contrary. See the section entitled “Where You Can Find More Information” for more details.

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom or from whom it is unlawful to make any such offer or solicitation in that jurisdiction. Except where the context otherwise indicates, information contained in this proxy statement/prospectus regarding Evans has been provided by Evans and information contained in this proxy statement/prospectus regarding FSB has been provided by FSB.

 


Table of Contents

TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THE PROPOSED MERGERS AND THE FSB SPECIAL MEETING

     1  

SUMMARY

     11  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF EVANS

     20  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF FSB

     22  

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION

     24  

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

     33  

MARKET PRICE AND DIVIDENDS

     34  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     35  

RISK FACTORS

     36  

Risks Relating to the Mergers

     36  

Risks Relating to the Combined Company’s Business Following the Mergers

     41  

Risks Related to Evans’ Business

     43  

Risks Related to FSB’s Business

     43  

THE FSB SPECIAL MEETING

     50  

Date, Time and Place of the FSB Special Meeting

     50  

Purpose of the FSB Special Meeting

     50  

Recommendation of the FSB Board of Directors

     50  

Record Date, Outstanding Shares, Shares Entitled to Vote and Quorum

     50  

Vote Required, Treatment of Abstentions and Failure to Vote

     50  

Shares Held by FSB’s Executive Officers and Directors

     51  

Voting of Proxies and Incomplete Proxies

     51  

Shares Held in Street Name and Broker Non-Votes

     52  

How to Revoke Your Proxy

     52  

Voting in Person

     53  

Participants in the ESOP and the FSB Savings Plan

     53  

Proxy Solicitation

     54  

Assistance

     54  

THE FSB PROPOSALS

     55  

Proposal No. 1: The Merger Proposal

     55  

Proposal No. 2: The Adjournment Proposal

     55  

INFORMATION ABOUT THE COMPANIES

     57  

THE MERGERS

     58  

Terms of the Mergers

     58  

Background of the Mergers

     58  

FSB’s Reasons for the Mergers and Recommendation of the FSB Board of Directors

     65  

Opinion of FSB’s Financial Advisor

     68  

Evans’ Reasons for the Mergers

     82  

Management and Board of Directors of Evans After the Mergers

     83  


Table of Contents

Interests of FSB’s Directors and Executive Officers in the Mergers

     83  

Regulatory Approvals Required for the Mergers

     89  

Accounting Treatment

     90  

Public Trading Market

     90  

Appraisal and Dissenters’ Rights

     90  

THE MERGER AGREEMENT

     91  

Structure of the Mergers

     91  

Treatment of the FSB Equity Awards

     91  

Treatment of the ESOP and FSB Savings Plan

     92  

Surviving Corporation Governing Documents

     92  

Governance Matters

     92  

Closing and Effective Time

     92  

Election Procedures

     93  

Adjustment and Allocation Procedures

     94  

Representations and Warranties

     95  

Covenants and Agreements

     99  

Agreement Not to Solicit Other Offers

     104  

FSB Special Meeting and Recommendation of the FSB Board of Directors

     105  

Conditions to Consummation of the Mergers

     107  

Termination of the Merger Agreement

     107  

Effect of Termination

     108  

Termination Fee

     108  

Expenses and Fees

     109  

Amendments and Waivers

     109  

Voting Agreements

     109  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE MERGERS

     111  

COMPARISON OF STOCKHOLDERS’ RIGHTS

     114  

SECURITY OWNERSHIP OF FSB DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL OWNERS OF FSB

     130  

LEGAL MATTERS

     133  

EXPERTS

     133  

OTHER MATTERS

     133  

DEADLINES FOR SUBMITTING EVANS SHAREHOLDER PROPOSALS

     133  

DEADLINES FOR SUBMITTING FSB STOCKHOLDER PROPOSALS

     134  

WHERE YOU CAN FIND MORE INFORMATION

     134  

Annex Index

 

Annex A:    Agreement and Plan of Reorganization, dated December 19, 2019, as amended on March 5, 2020, by and among Evans Bancorp, Inc., MMS Merger Sub, Inc. and FSB Bancorp, Inc.
Annex B:    Form of Voting Agreement, dated December 19, 2019, by and among Evans Bancorp, Inc., FSB Bancorp, Inc. and certain stockholders of FSB Bancorp, Inc.
Annex C:    Opinion of Sandler O’Neill & Partners, L.P.
Annex D:    Financial and Other Additional Information About FSB
Annex E:    Consolidated Financial Statements of FSB Bancorp, Inc.


Table of Contents

QUESTIONS AND ANSWERS ABOUT THE PROPOSED MERGERS AND THE FSB SPECIAL MEETING

The following are some questions that you may have regarding the mergers and the FSB special meeting of stockholders, which we refer to as the FSB special meeting, and brief answers to those questions. We urge you to read carefully the remainder of this proxy statement/prospectus because the information in this section does not provide all of the information that might be important to you with respect to the mergers and the FSB special meeting. Additional important information is also contained in the documents incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find More Information.” Unless the context otherwise requires, references in this proxy statement/prospectus to Evans refer to Evans Bancorp, Inc. and its consolidated subsidiaries and references to FSB refer to FSB Bancorp, Inc. and its consolidated subsidiaries, and references to “we,” “our” and “us” refer to Evans and FSB together.

As described below, it is important to note that the aggregate amount of merger consideration may increase or decrease if the number of fully diluted shares of FSB common stock outstanding changes after the date hereof. As a result, the aggregate amount of the merger consideration shown throughout this proxy statement/prospectus is for illustrative purposes only based on the assumptions described herein.

 

Q:

What are the mergers?

 

A:

Evans, MMS Merger Sub, Inc., a Maryland corporation and wholly owned subsidiary of Evans, which we refer to as Merger Sub, and FSB have entered into an Agreement and Plan of Reorganization, dated as of December 19, 2019, as amended on March 5, 2020, which we refer to as the merger agreement, pursuant to which, among other things, (i) Merger Sub will merge with and into FSB, with FSB continuing as the surviving corporation, which we refer to as the merger, (ii) immediately following the merger, FSB will merge with and into Evans, with Evans continuing as the surviving corporation, which we refer to as the second merger and together with the merger, the holdco mergers, and (iii) immediately following the second merger, Fairport Savings Bank, which we refer to as FSB Bank, will merge with and into Evans Bank N.A, which we refer to as Evans Bank, with Evans Bank continuing as the surviving bank, which we refer to as the bank merger, and together with the holdco mergers, as the mergers. A copy of the merger agreement is attached as Annex A to this proxy statement/prospectus. Following the merger, the shares of FSB common stock, par value $0.01 per share, which we refer to as FSB common stock, will be delisted from the Nasdaq Capital Market, or Nasdaq, and thereafter will be deregistered under the Exchange Act.

 

Q:

Why am I receiving this proxy statement/prospectus?

 

A:

FSB is sending these materials to the holders of FSB common stock, to help FSB stockholders, decide how to vote their shares with respect to the matters to be considered at the FSB special meeting.

The mergers cannot be completed unless the FSB stockholders approve the merger agreement and the transactions contemplated thereby, including the mergers. The proposal to approve the merger agreement and the transactions contemplated thereby, including the mergers, which we refer to as the merger proposal, requires the affirmative vote of holders of a majority of the outstanding shares of FSB common stock entitled to vote on the merger proposal, which we refer to as the FSB stockholder approval. FSB is holding the FSB special meeting to vote on the proposals necessary to complete the mergers as well as other related matters. Information about the FSB special meeting, the mergers and the other business to be considered by FSB stockholders at the FSB special meeting is contained in this proxy statement/prospectus.

This document constitutes both a proxy statement of FSB and a prospectus of Evans. It is a proxy statement because the board of directors of FSB, or the FSB board of directors, is using this document to solicit proxies from the FSB stockholders. This document is also a prospectus because Evans, in connection with the merger, is offering shares of common stock, par value $0.50 per share, of Evans, which we refer to as Evans common stock, in exchange for outstanding shares of FSB common stock.

 

1


Table of Contents
Q:

What will FSB stockholders receive in the merger?

 

A:

Under the terms and conditions of the merger agreement, at the effective time of the merger, each outstanding share of FSB common stock, held immediately prior to the effective time of the merger, except for specified shares of FSB common stock owned by FSB or Evans (which will be cancelled), will be converted into the right to receive, at the election of such holder, either (i) 0.4394 shares, with such number being referred to as the exchange ratio and such shares being referred to as stock consideration, of Evans common stock, or (ii) $17.80 in cash, which we refer to as the cash consideration and together with the stock consideration we refer to as the merger consideration, together with cash in lieu of fractional shares, if any. All such elections are subject to adjustment on a pro rata basis, so that approximately 50% of the aggregate merger consideration paid to FSB stockholders will be the cash consideration and approximately 50% will be the stock consideration.

Evans will not issue any fractional shares of Evans common stock in the merger. Instead, a stockholder of FSB who otherwise would have received a fraction of a share of FSB common stock will receive an amount in cash rounded to the nearest whole cent. This cash amount will be determined by multiplying (i) the average of the closing-sale prices of Evans common stock for the ten full trading days ending on the fifth day prior to the closing date of the merger, which we refer to as the average closing price, by (ii) the fraction of a share (rounded to the nearest thousandth when expressed in decimal form) of Evans common stock which such stockholder of FSB would otherwise be entitled to receive.

 

Q:

How might the merger consideration I elect to receive be adjusted on a pro rata basis?

 

A:

Each holder of FSB common stock is entitled to elect the form of consideration that he or she would like to receive for his or her shares of FSB common stock in the merger, including electing to receive the cash consideration for a portion of his or her shares of FSB common stock and receive the stock consideration for the remainder of his or her shares of FSB common stock. We refer to a share for which an election to receive the cash consideration is made as a cash election share, a share for which an election to receive the stock consideration is made as a stock election share and a share of FSB common stock for which no election is made as a non-election share. All such elections are subject to adjustment on a pro rata basis.

The merger agreement provides that the aggregate amount of the cash consideration that holders of FSB common stock are entitled to receive is equal to the product of (i) $17.80, which we refer to as the per share cash amount, multiplied by (ii) 50% of FSB shares outstanding, which product we refer to as the cash value.

As a result, all elections may be subject to proration depending on the elections made by other holders of FSB common stock if the cash value is undersubscribed or oversubscribed. Proration will be applied so that ultimately approximately 50% of the shares of FSB common stock are treated as cash election shares and approximately 50% of the shares of FSB common stock are treated as stock election shares.

 

Q:

Is the value of the per share merger consideration that I receive for my shares of FSB common stock expected to be substantially equivalent regardless of which election I make?

 

A:

There will be no adjustment to the fixed number of shares of Evans common stock that will be issued to FSB stockholders who receive the stock consideration based upon changes in the market price of Evans common stock or FSB common stock prior to the effective time of the merger. The value of the cash

 

2


Table of Contents
  consideration will not change. As result, the value of the merger consideration received by holders of FSB common stock who receive the cash consideration may differ from the value of the merger consideration received by holders of FSB common stock who receive the stock consideration.

The market price of Evans common stock at the time the merger is completed may vary from the price of Evans common stock on the date the merger agreement was executed, on the date of this proxy statement/prospectus, on the date of the FSB special meeting, and at the effective time of the merger as a result of various factors that are beyond the control of Evans and FSB, including but not limited to general market and economic conditions, changes in our respective businesses, operations and prospects, and regulatory considerations. In addition to the adoption and approval of the merger agreement by FSB stockholders, consummation of the mergers is subject to receipt of required regulatory approvals and satisfaction of other conditions that may not occur until after the FSB special meeting. Therefore, at the time of the FSB special meeting you will not know the precise value of the stock consideration, if any, that you will receive at the effective time. You should obtain current market quotations for shares of Evans common stock.

There will be no adjustment to the merger consideration based upon changes in the market price of Evans common stock prior to the time the merger is completed. The merger agreement cannot be terminated due to a change in the price of Evans common stock.

 

Q:

How do I make an election for the type of the merger consideration that I prefer to receive and when can I expect to receive the merger consideration?

 

A:

Each holder of record of FSB common stock will be mailed a form of election not more than 40 business days and not less than 20 business days prior to the anticipated closing date or on such other date as Evans and FSB may mutually agree. The deadline for holders of FSB common stock to elect the form of the merger consideration they want to receive is 5:00 p.m. Eastern time on the date that is five business days prior to the anticipated closing date, which we refer to as the election deadline. Each holder of FSB common stock should specify in the election form (1) the number of shares of FSB common stock which such stockholder elects to have exchanged for the stock consideration, and (2) the number of shares of FSB common stock such stockholder elects to have exchanged for the cash consideration. All such elections are subject to adjustment on a pro rata basis as described elsewhere in this proxy statement/prospectus. Holders of FSB common stock will receive their merger consideration as promptly as practicable following the effective time of the merger, subject to the holders submitting their properly completed letter of transmittal and other transmittal materials. Election choices and election procedures are described under the section entitled “The Mergers—Election Procedures.”

 

Q:

May a FSB stockholder change his or her election once it has been submitted?

A: Yes. An election may be changed so long as the new form of election is received by the exchange agent prior to the election deadline. To change or revoke an election, a FSB stockholder must send the exchange agent a written notice revoking any election previously submitted, accompanied by a properly completed and signed revised form of election or by withdrawal prior to the election deadline. In the event a form of election is revoked prior to the election deadline, unless a subsequent properly completed form of election together with the revoking holder’s shares and related transmittal materials is submitted and actually received by the exchange agent by the election deadline, the shares of FSB common stock represented by such revoked form of election will become non-electing shares.

 

Q:

How will a FSB stockholder know when the election deadline is?

 

A:

The actual election deadline is not currently known. Evans and FSB will issue a press release announcing the date of the election deadline not more than 15 business days before and at least five business days before that deadline. See the section entitled “The Mergers—Election Procedures.”

 

3


Table of Contents
Q:

What happens if an election is not made prior to the election deadline?

 

A:

If a FSB stockholder fails to submit a form of election to the exchange agent prior to the election deadline, then that holder’s shares of FSB common stock will be deemed to be non-election shares and such holder will receive stock consideration or cash consideration as determined by the proration procedures described elsewhere in this proxy statement/prospectus.

 

Q:

What will happen to FSB equity awards in the merger?

 

A:

At the effective time of the merger, subject to the terms and conditions of the merger agreement, each option to purchase shares of FSB common stock issued pursuant to the FSB 2017 Equity Incentive Plan, which we refer to as the FSB Equity Plan, whether vested or unvested, that is outstanding and unexercised immediately prior to the effective time, which we refer to as a FSB stock option, will be cancelled and converted automatically into the right to receive a cash payment equal to the difference, if positive, between $17.80 and the exercise price per share of the FSB common stock subject to such FSB stock option. Any FSB stock option with an exercise price that equals or exceeds $17.80 will be cancelled without consideration. The consideration payable in respect of FSB stock options will be issued net of applicable tax withholdings.

At the effective time of the merger, subject to the terms and conditions of the merger agreement, each restricted stock award issued pursuant to the FSB Equity Plan, which we refer to as an FSB restricted stock award, that is outstanding immediately prior to the effective time (whether vested or unvested), will be cancelled and converted automatically into the right to receive the merger consideration.

 

Q:

What will happen to the shares of FSB common stock held by each of the FSB Bank Employee Stock Ownership Plan and Trust, or the ESOP, and FSB 401(k) Savings Plan, or the FSB Savings Plan?

 

A:

The ESOP, and any related agreement will be terminated prior to, and contingent upon, the closing date of the merger, subject to the preparation of a termination amendment setting forth the terms of termination and allocation and distribution of the ESOP assets. All shares held by the ESOP will be converted into the right to receive the merger consideration. Any outstanding ESOP indebtedness will be repaid from unallocated FSB common stock held in the ESOP’s suspense account, with any remaining shares to be allocated to the active participants on a pro rata basis. All remaining shares of FSB common stock will be converted into the right to receive the merger consideration.

At the effective time of the merger, subject to the terms and conditions of the merger agreement, each share of FSB common stock held in the FSB Savings Plan that is outstanding immediately prior to the effective time will be converted into the right to receive the merger consideration.

 

Q:

When do you expect to complete the mergers?

 

A:

We expect to complete the mergers in the second quarter of 2020. However, we cannot assure you of when or if the mergers will be completed. We must first obtain the approval of the FSB stockholders, as well as obtain necessary regulatory approvals and satisfy certain other closing conditions. For further information, please see the section entitled “The Merger Agreement—Conditions to Consummation of the Mergers.”

 

Q:

What am I being asked to vote on?

 

A:

FSB stockholders are being asked to vote on the following:

 

   

a proposal to approve the merger agreement, pursuant to which Merger Sub will merge with and into FSB, as more fully described in this proxy statement/prospectus, which we refer to as the merger proposal; and

 

4


Table of Contents
   

the approval of one or more adjournments or postponements of the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the merger proposal, which we refer to as the adjournment proposal.

Stockholder approval of the merger proposal is required to complete the mergers. FSB will transact no other business at the FSB special meeting, except for the business properly brought before the FSB special meeting or any adjournment or postponement thereof.

 

Q:

How does the FSB board of directors recommend that FSB stockholders vote at the FSB special meeting?

A: The FSB board of directors has unanimously approved and adopted the merger agreement and the transactions contemplated thereby, and recommends that FSB stockholders vote “FOR” the merger proposal and “FOR” the adjournment proposal.

 

Q:

When and where is the FSB special meeting?

 

A:

The FSB special meeting is scheduled to take place at the Perinton Community Center located at 1350 Turk Hill Road, Fairport, New York 14450 on April 20, 2020 at 2:00 p.m., local time.

 

Q:

What constitutes a quorum for the FSB special meeting?

 

A:

FSB stockholders representing a majority of the shares entitled to vote at the FSB special meeting must be present at the special meeting, either in person or by proxy, for there to be a quorum at the special meeting. Abstentions will be included in determining the number of shares present at the FSB special meeting for the purpose of determining the presence of a quorum.

 

Q:

Who is entitled to vote?

 

A:

All holders of FSB common stock who held shares at the close of business on March 5, 2020, which is the date that the FSB board of directors has fixed as the FSB record date, are entitled to receive notice of and to vote at the FSB special meeting provided that such shares remain outstanding on the date of the FSB special meeting.

 

Q:

What is the vote required to approve each proposal at the FSB special meeting?

 

A:

Merger Proposal

 

   

Standard: Approval of the merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of FSB common stock entitled to vote on the merger proposal.

 

   

Effect of abstentions and broker non-votes: If you fail to vote, mark “ABSTAIN” on your proxy or fail to either submit a proxy or vote at the FSB special meeting, or are a “street name” holder and fail to instruct your broker, bank, or other nominee how to vote with respect to the merger proposal, it will have the same effect as a vote “AGAINST” the merger proposal.

 

    

Adjournment Proposal

 

   

Standard: Assuming a quorum is present, approval of the adjournment proposal, if necessary or required, requires the affirmative vote of the holders of a majority of the votes present in person or by proxy at the FSB special meeting and entitled to vote thereon. If a quorum is not present, the adjournment proposal may nevertheless be approved by the affirmative vote of the holders of a majority in voting power of the FSB common stock held by the FSB stockholders present in person or by proxy at the FSB special meeting and entitled to vote thereon.

 

5


Table of Contents
   

Effect of abstentions and broker non-votes: If you fail to vote, mark “ABSTAIN” on your proxy or fail to either submit a proxy or vote at the FSB special meeting, or are a “street name” holder and fail to instruct your broker, bank or other nominee how to vote with respect to the adjournment proposal, it will have no effect on the adjournment proposal.

 

Q:

Are there any voting agreements with existing FSB stockholders?

 

A:

Yes. In connection with entering into the merger agreement, each of the directors of FSB and certain FSB executive officers, in their capacities as individuals, have separate voting agreements, which we refer to as the FSB voting agreements, pursuant to which they agreed to vote their beneficially owned shares of FSB common stock in favor of the merger proposal and certain related matters and against alternative transactions. As of the close of business on March 5, 2020, which we refer to as the FSB record date, shares constituting approximately 9.47% of the FSB common stock entitled to vote at the FSB special meeting are subject to FSB voting agreements. For further information, please see the section entitled “The Merger Agreement—Voting Agreements.”

 

Q:

Why is my vote important?

 

A:

If you do not vote, it will be more difficult for FSB to obtain the necessary quorum to hold the FSB special meeting. Additionally, each proposal must be approved by the voting requirements described above. The FSB board of directors unanimously recommends that FSB stockholders vote “FOR” the merger proposal and “FOR” the adjournment proposal.

 

Q:

How many votes do I have?

 

A:

Each FSB stockholder of record on the FSB record date will be entitled to one vote for each share held of record. As of the FSB record date, there were 1,940,661 shares of FSB common stock entitled to vote at the FSB special meeting. As of the FSB record date, the directors and executive officers of FSB and their affiliates beneficially owned and were entitled to vote approximately 132,686 shares of FSB common stock, representing approximately 6.84% of the shares of FSB common stock outstanding on that date.

 

Q:

What do I need to do now?

 

A:

After carefully reading and considering the information contained in or incorporated by reference into this proxy statement/prospectus, including its annexes, please complete, sign, date and return the enclosed proxy card to FSB in the enclosed postage-paid envelope or by submitting a proxy through the Internet or by telephone as described in the attached instructions as soon as possible so that your shares will be represented at the FSB special meeting.

 

Q:

How do I vote?

 

A:

If you are a FSB stockholder of record as of the FSB record date, you can ensure that your shares of FSB common stock are voted at the FSB special meeting by submitting your proxy via:

 

   

mail, by completing, signing and dating the enclosed proxy card and returning it to FSB using the enclosed postage-paid envelope;

 

   

telephone, by calling toll free 1-800-652-8683 and following the recorded instructions; or

 

   

the Internet, by accessing the website www.investorvote.com/FSBM and following the instructions on the website.

If you intend to submit your proxy through the Internet or by telephone, you must do so by 1:00 a.m. Eastern Time on April 20, 2020, the day of the FSB special meeting. If you intend to submit your proxy by mail, your completed proxy card must be received prior to the FSB special meeting.

 

6


Table of Contents

If you hold your shares of FSB common stock in “street name” through a broker, bank or other nominee, you must direct your broker, bank or other nominee how to vote in accordance with the instructions you have received from your broker, bank or other nominee.

 

Q:

If my shares of FSB common stock are held in “street name” by my broker, bank, or other nominee, will my broker, bank, or other nominee automatically vote my shares for me?

 

A:

No. If your shares of FSB common stock are held in “street name” through a broker, bank or other nominee, meaning in the name of a broker, bank or other nominee who is the record holder, you must provide such record holder of your shares of FSB common stock with instructions on how to vote your shares of FSB common stock. Please follow the voting instructions provided by the broker, bank or other nominee. You may not vote your shares of FSB common stock held in street name by returning a proxy card directly to FSB or by voting in person at the FSB special meeting, unless you provide a “legal proxy,” which you must obtain from your broker, bank or other nominee. Further, brokers, banks or other nominees who hold shares of FSB common stock on behalf of their customers may not give a proxy to FSB to vote those shares of FSB common stock with respect to any of the proposals without specific instructions from their customers, as brokers, banks and other nominees do not have discretionary voting power on these matters. Therefore, failure to instruct your broker, bank or other nominee how to vote will have the same effect as a vote “AGAINST” approval of the merger proposal.

 

Q:

I am a participant in the ESOP. How do I vote shares held in the ESOP?

 

A:

Participants in the ESOP will each receive a voting instruction form that reflects all of the shares that the participant may direct the trustee to vote on his or her behalf under the ESOP. Under the terms of the ESOP, the ESOP trustee votes all shares held by the ESOP, but each ESOP participant may direct the trustee how to vote the shares of FSB common stock allocated to his or her account. The ESOP trustee will vote all unallocated shares of FSB common stock held by the ESOP and allocated shares for which no voting instructions are received in the same proportion as shares for which it has received timely voting instructions.

 

Q:

I participate in the FSB Savings Plan. Do I get to vote or direct the voting of shares of FSB allocated to my account?

 

A:

Participants in the FSB Savings Plan with an interest in the FSB Bancorp, Inc. Stock Fund, which we refer to as the FSB Stock Fund, will receive a voting instruction form that allows them to direct the FSB Savings Plan trustee to vote their interest in the FSB Stock Fund. If a participant does not direct FSB Savings Plan trustee how to vote his or her interests in the FSB Stock Fund, the trustee will vote such interest in the same proportion as it has received timely voting instructions from other FSB Savings Plan participants.

 

Q:

What will happen if I return my proxy without indicating how to vote?

 

A:

If you sign and return your proxy or voting instruction card without indicating how to vote on any particular proposal, the FSB common stock represented by your proxy will be voted as recommended by the FSB board of directors with respect to each FSB proposal.

 

Q:

May I change my vote after I have delivered my proxy?

 

A:

Yes. If you are a holder of record of FSB common stock and you have previously submitted your proxy, you may revoke your proxy at any time by taking any of the following actions before your proxy is voted at the FSB special meeting:

 

   

delivering a written notice bearing a date later than the date of your proxy card to the corporate secretary of FSB, stating that you revoke your proxy, which notice must be received by FSB prior to the beginning of the FSB special meeting;

 

7


Table of Contents
   

completing, signing, dating and returning to the corporate secretary of FSB a new proxy card relating to the same shares of FSB common stock and bearing a later date, which new proxy card must be received by FSB prior to the beginning of the FSB special meeting;

 

   

casting a new vote through the Internet or by telephone at any time before 1:00 a.m. Eastern Time on April 20, 2020, the day of the FSB special meeting; or

 

   

attending the FSB special meeting and voting in person, although attendance at the FSB special meeting will not, by itself, revoke a proxy.

You should send any written notice of revocation or any duly executed new proxy, as the case may be, to FSB at the following address:

FSB Bancorp, Inc.

45 South Main Street

Fairport, New York 14450

Attn: Roberta Ryan, Corporate Secretary

If you hold your shares of FSB common stock in “street name” through a broker, bank or other nominee, you must contact your record holder to change your vote.

 

Q:

Are FSB stockholders entitled to appraisal and dissenters’ rights?

 

A:

Under Maryland law and the articles of incorporation of FSB, as amended, which we refer to as the FSB charter, FSB stockholders will not be entitled to exercise any appraisal or dissenters’ rights in connection with the mergers.

 

Q:

What are the material U.S. federal income tax consequences of the mergers to FSB stockholders?

 

A:

As a condition to the respective obligations of Evans and FSB to each complete the mergers, Evans will receive a legal opinion from Covington & Burling LLP, or Covington, and FSB will receive a legal opinion from Luse Gorman PC, or Luse Gorman, each dated as of the closing date, and each to the effect that the merger and second merger, taken together, qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code, which we refer to as the Code.

If the merger and second merger, taken together, qualify as a reorganization within the meaning of Section 368(a) of the Code, for U.S. federal income tax purposes:

 

   

a U.S. holder (as defined in the section entitled “Material U.S. Federal Income Tax Consequences Relating to the Mergers”) of FSB common stock receiving solely Evans common stock (except for cash received in lieu of fractional shares of Evans common stock) in exchange for such FSB common stock generally will not recognize any gain or loss upon receiving Evans common stock;

 

   

a U.S. holder of FSB common stock receiving solely cash in exchange for such FSB common stock generally will recognize gain or loss in an amount equal to the difference between the amount of cash received and the U.S. holder’s aggregate tax basis in the shares of FSB common stock surrendered; and

 

   

a U.S. holder of FSB common stock receiving a combination of Evans common stock and cash in exchange for such FSB common stock generally will (1) not recognize any loss upon surrendering its FSB common stock and (2) recognize gain upon surrendering its FSB common stock equal to the excess, if any, of (a) the sum of the amount of cash consideration received plus the fair market value (determined as of the effective time) of the Evans common stock received over (b) such U.S. holder’s aggregate tax basis in the shares of FSB common stock surrendered, but only to the extent of the amount of cash consideration received.

 

8


Table of Contents

U.S. holders of FSB common stock receiving cash in lieu of fractional shares of Evans common stock will generally recognize gain or loss equal to the difference between the amount of cash received instead of a fractional share and the basis in its fractional share of Evans common stock.

For further information, see the section entitled “Material U.S. Federal Income Tax Consequences Relating to the Mergers.”

The U.S. federal income tax consequences described above may not apply to all FSB stockholders. Your tax consequences will depend on your individual situation. Accordingly, we strongly urge you to consult your independent tax advisor for a full understanding of the particular tax consequences of the mergers to you.

 

Q:

If I am a FSB stockholder, should I send in my stock certificates now?

A: No. FSB stockholders SHOULD NOT send in any FSB common stock certificates now. If the merger proposal is approved by FSB stockholders, transmittal materials with instructions for their completion will be provided to FSB stockholders under separate cover and the stock certificates should be sent at the time provided in the transmittal materials.

 

Q:

What should I do if I have my shares of FSB common stock in book-entry form?

 

A:

If you hold your shares of FSB common stock in uncertificated book-entry form, you are not required to take any specific actions to exchange your shares of FSB common stock, and after the completion of the merger, such shares will be automatically exchanged for the applicable merger consideration, subject to the previously described election procedures and possible adjustment.

 

Q:

Whom may I contact if I cannot locate my FSB stock certificate(s)?

 

A:

If you are unable to locate your original FSB stock certificate(s), you should contact FSB’s transfer agent, Computershare Trust Company, N.A., at (800) 368-5948.

 

Q:

What should I do if I receive more than one set of voting materials?

 

A:

FSB stockholders may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold shares of FSB common stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold such shares. If you are a holder of record of FSB common stock and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive or otherwise follow the voting instructions set forth in this proxy statement/prospectus to ensure that you vote every share of FSB common stock that you own.

 

Q:

What happens if I sell my shares of FSB common stock after the FSB record date but before the FSB special meeting?

 

A:

The FSB record date is earlier than the date of the FSB special meeting and the date that the mergers are expected to be completed. If you transfer your shares of FSB common stock after the FSB record date but before the date of the FSB special meeting, you will retain your right to vote at such meeting (provided that such shares remain outstanding on the date of such meeting), but you will not have the right to receive any merger consideration for the transferred shares of FSB common stock. You will only be entitled to receive the merger consideration in respect of shares of FSB common stock that you hold at the effective time.

 

9


Table of Contents
Q:

Are there risks involved in undertaking the mergers?

 

A:

Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors” beginning on page 36.

 

Q:

What happens if the merger is not completed?

 

A:

If the merger is not completed, FSB stockholders will not receive the merger consideration. Instead, each of FSB and Evans will remain an independent company and shares of common stock of each will continue to be listed and traded on the Nasdaq and New York Stock Exchange American, or NYSE, respectively.

 

Q:

Whom should I contact if I have questions?

 

A:

You may contact Evans or FSB at the telephone numbers listed in the section entitled “Where You Can Find More Information.” In each case, please ask to speak with a representative in the departments identified in that section. You may also contact EQ Proxy Services, FSB’s proxy solicitor. Banks and brokers can call (516) 220-8356, and all others can call, toll-free, (833) 503-4127.

 

Q:

Where can I find more information about Evans and FSB?

 

A:

You can find more information about Evans and FSB from the various sources described under the section entitled “Where You Can Find More Information.”

 

10


Table of Contents

SUMMARY

The following summary highlights selected information in this proxy statement/prospectus and may not contain all the information that may be important to you. You should read carefully this entire proxy statement/prospectus, including any document incorporated by reference in this proxy statement/prospectus, and its annexes, because this section may not contain all of the information that may be important to you in determining how to vote. For a description of, and instructions as to how to obtain, this information, see the section entitled “Where You Can Find More Information.” Each item in this summary refers to the page of this proxy statement/prospectus on which that subject is discussed in more detail.

The Companies (page 57)

Evans Bancorp, Inc.

One Grimsby Drive

Hamburg, New York 14075

Telephone: (716) 926-2000

Evans is a financial holding company and the parent company of Evans Bank, a commercial bank with $1.5 billion in assets and $1.3 billion in deposits at September 30, 2019. Evans Bank is a full-service community bank, with 15 financial centers providing comprehensive financial services to consumer, business and municipal customers throughout Western New York. Evans’ wholly owned insurance subsidiary, The Evans Agency, LLC, provides life insurance, employee benefits and property and casualty insurance through ten insurance offices in the Western New York region. Evans Investment Services provides non-deposit investment products, such as annuities and mutual funds. Evans common stock is traded on the NYSE under the symbol “EVBN.”

Additional information about Evans and its subsidiaries is included in documents incorporated by reference in this proxy statement/prospectus. See the section entitled “Where You Can Find More Information.”

FSB Bancorp, Inc.

45 South Main Street

Fairport, New York 14450

Telephone:(585) 223-9080

FSB is a bank holding company that has elected “financial holding company” status, and the parent company of Fairport Savings Bank, a New York stock savings bank with $324.8 million in consolidated assets and $232.9 million in deposits at September 30, 2019.

FSB Bank was established in 1888 and is headquartered in Fairport, New York. FSB Bank conducts business from its main office in Fairport and through four branch offices located in Penfield, Irondequoit, Webster and Perinton, New York, all of which are located in the greater Rochester metropolitan area. FSB Bank also operates loan origination offices in Pittsford and Greece, New York, in the Rochester metropolitan area, as well as in Buffalo and Watertown, New York. FSB common stock is listed on the Nasdaq under the symbol “FSBC.”

The Mergers (page 58)

The terms and conditions of the mergers are contained in the merger agreement, which is attached to this proxy statement/prospectus as Annex A. We urge you to read the merger agreement carefully and in its entirety, as it is the legal document governing the mergers. All descriptions in this summary and elsewhere in this proxy statement/prospectus of the terms and conditions of the mergers are subject to, and qualified in their entirety by reference to, the merger agreement.

 

11


Table of Contents

The merger agreement provides for, among other things, (i) the merger of Merger Sub with and into FSB, with FSB continuing as the surviving corporation in the merger and as a wholly-owned subsidiary of Evans, (ii) immediately following the completion of the merger, the merger of FSB with and into Evans, with Evans continuing as the surviving corporation in the second merger and (iii) immediately following the completion of the holdco mergers, the merger of FSB Bank with and into Evans Bank with Evans Bank continuing as the surviving bank in the bank merger.

Subject to the terms and conditions of the merger agreement, upon the consummation of the merger, FSB stockholders will have the right to receive, for each share of FSB common stock, at the election of such holder, either (i) 0.4394 shares of Evans common stock, or (ii) $17.80 in cash. All such elections are subject to adjustment on a pro rata basis, so that approximately 50% of the aggregate consideration paid to FSB stockholders will be cash and approximately 50% will be Evans common stock. See the section entitled “The Merger Agreement—Adjustment and Allocation Procedures” for further information on the allocation procedures.

Treatment of the FSB Equity Awards (page 91)

At the effective time of the merger, subject to the terms and conditions of the merger agreement, each FSB stock option, whether vested or unvested, that is outstanding and unexercised immediately prior to the effective time, will be cancelled and converted automatically into the right to receive a cash payment equal to the difference, if positive, between $17.80 and the exercise price per share of the FSB common stock subject to such FSB stock option. Any FSB stock option with an exercise price that equals or exceeds $17.80 will be cancelled without consideration. The consideration payable in respect of FSB stock options will be issued net of applicable tax withholdings.

At the effective time of the merger, subject to the terms and conditions of the merger agreement, each FSB restricted stock award that is outstanding immediately prior to the effective time (whether vested or unvested), will be cancelled and converted automatically into the right to receive the merger consideration.

Treatment of the ESOP and FSB Savings Plan (page 92)

The ESOP, and any related agreement will be terminated prior to, and contingent upon, the closing date of the merger, subject to the preparation of a termination amendment setting forth the terms of termination and allocation and distribution of the ESOP assets. All shares held by the ESOP will be converted into the right to receive the merger consideration. Any outstanding ESOP indebtedness will be repaid from unallocated FSB common stock held in the ESOP’s suspense account. All remaining shares of FSB common stock will be converted into the right to receive the merger consideration.

At the effective time of the merger, each share of FSB common stock held in the FSB Savings Plan that is outstanding immediately prior to the effective time will be converted into the right to receive the merger consideration.

FSB’s Reasons for the Mergers and Recommendation of the FSB Board of Directors (page 65)

The FSB board of directors has unanimously approved the merger agreement and the transactions contemplated thereby and recommends that FSB stockholders vote “FOR” the merger proposal and “FOR” the adjournment proposal. Please see the section entitled “The Mergers—FSB’s Reasons for the Mergers and Recommendation of the FSB Board of Directors” for a more detailed discussion of the factors considered by the FSB board of directors in reaching its decision to approve the merger agreement and the transactions contemplated thereby.

 

12


Table of Contents

Opinion of FSB’s Financial Advisor (page 68)

Sandler O’Neill & Partners, L.P., or Sandler O’Neill, acted as financial advisor to the FSB board of directors in connection with the proposed mergers and participated in certain of the negotiations leading to the execution of the merger agreement. At the December 19, 2019 meeting at which the FSB board of directors considered the mergers and the merger agreement, Sandler O’Neill delivered to the board of directors its oral opinion, which was subsequently confirmed in writing on December 19, 2019, to the effect that, as of such date, the merger consideration was fair to the holders of FSB common stock from a financial point of view. The full text of Sandler O’Neill’s opinion is attached as Annex C to this proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the full text of the opinion. FSB stockholders are urged to read the entire opinion carefully in connection with their consideration of the proposed mergers.

Sandler O’ Neill’s opinion was directed to the FSB board of directors in connection with its consideration of the mergers and the merger agreement and does not constitute a recommendation to any stockholder of FSB as to how any such stockholder should vote at any meeting of stockholders called to consider and vote upon the approval of the mergers and the merger agreement. Sandler O’ Neill’s opinion was directed only to the fairness, from a financial point of view, of the merger consideration to the holders of FSB common stock and did not address the underlying business decision of FSB to engage in the mergers, the form or structure of the mergers or any other transactions contemplated in the merger agreement, the relative merits of the mergers as compared to any other alternative transactions or business strategies that might exist for FSB or the effect of any other transaction in which FSB might engage.

For a description of Sandler O’ Neill’s opinion, please refer to the section entitled “The Mergers—Opinion of FSB’s Financial Advisor.”

Evans’ Reasons for the Mergers (page 82)

The Evans board of directors approved and adopted the merger agreement. Please see the section entitled “The Mergers—Evans’ Reasons for the Mergers” for a more detailed discussion of the factors considered by the Evans board of directors in reaching its decision to approve the merger agreement and the transactions contemplated therein.

The FSB Special Meeting (page 50)

FSB will be held at the Perinton Community Center located at 1350 Turk Hill Road, Fairport, New York 14450 on April 20, 2020 at 2:00 p.m., local time. At the FSB special meeting you will be asked to vote upon the following matters (each as described in the section entitled “The Proposals”):

 

   

the merger proposal; and

 

   

the adjournment proposal.

You can vote at the FSB special meeting of stockholders if you owned FSB common stock at the FSB record date. As of that date, there were approximately 1,940,661 shares of FSB common stock outstanding and entitled to vote, approximately 132,686 of which, or 6.84%, were owned beneficially or of record by directors and executive officers of FSB. You can cast one vote for each share of FSB common stock that you owned on that date.

Stockholders representing a majority of the shares entitled to vote at the FSB special meeting must be present at the special meeting, either in person or by proxy, for there to be a quorum at the special meeting.

The affirmative vote of the holders of a majority of the outstanding shares of FSB common stock is required to approve the merger proposal. Assuming a quorum is present, a majority of the votes present in person or by proxy is required to approve the adjournment proposal.

 

13


Table of Contents

The FSB stockholders must approve the merger proposal in order for the mergers to occur. The FSB stockholders are not, however, required to approve the adjournment proposal in order for the mergers to occur. If the FSB stockholders fail to approve the adjournment proposal, but approve the merger proposal, the mergers may nonetheless occur.

Interests of FSB’s Directors and Executive Officers in the Mergers (page 83)

In considering the recommendation of the FSB board of directors with respect to the merger, FSB stockholders should be aware that the executive officers and directors of FSB and FSB Bank have certain interests in the merger that may be different from, or in addition to, the interests of FSB stockholders generally. The FSB board of directors was aware of these interests and considered them, among other matters, in reaching its decision to approve the merger agreement and the transactions contemplated by the merger agreement and to recommend that FSB stockholders vote “FOR” the merger proposal.

These interests are described in more detail under the section entitled “The Mergers—Interests of FSB’s Directors and Executive Officers in the Mergers.”

Management and Board of Directors of Evans after the Mergers (page 83)

Pursuant to the merger agreement, at the effective time, Kevin Maroney will join the boards of directors of Evans and Evans Bank, and as a result such boards will consist of 14 members. Kevin Maroney is the current President and Chief Executive Officer of FSB and a member of the current FSB board of directors.

Surviving Corporation Governing Documents (page 92)

At the effective time, the certificate of incorporation of Evans, as amended, which we refer to as the Evans charter, and the amended and restated bylaws of Evans, which we refer to as the Evans bylaws, in effect immediately prior to the effective time will be the certificate of incorporation and bylaws of the surviving corporation, until the same are duly amended or repealed.

Regulatory Approvals Required for the Mergers (page 89)

The merger of Merger Sub with and into FSB requires the approval or waiver of the Board of Governors of the Federal Reserve System, which we refer to as the Federal Reserve, under the Bank Holding Company Act, which we refer to as the BHC Act, and the New York State Department of Financial Services, which we refer to as the NYDFS, under the New York Banking Law, which we refer to as the NYBL. The merger of FSB with and into Evans requires the approval of the NYDFS under the NYBL. The merger of FSB Bank with and into Evans Bank requires the approval of the Office of the Comptroller of the Currency, which we refer to as the OCC, under the Bank Merger Act. Although neither Evans nor FSB knows of any reason why the parties cannot obtain regulatory approvals required to consummate the mergers in a timely manner, Evans and FSB cannot be certain of when or if such approvals will be obtained.

Accounting Treatment (page 90)

The mergers will be accounted for as an acquisition by Evans using the acquisition method of accounting in accordance with FASB ASC Topic 805, “Business Combinations.” The result of this is that (1) the recorded assets and liabilities of Evans will be carried forward at their recorded amounts, (2) Evans historical operating results will be unchanged for the prior periods being reported on, and (3) the assets and liabilities of FSB will be adjusted to fair value at the date Evans assumes control of the combined entity, or the effective date. In addition, all identifiable intangibles will be recorded at fair value and included as part of the net assets acquired. The amount by which the purchase price, consisting of the value of the cash and the shares of Evans common stock to

 

14


Table of Contents

be issued to former FSB stockholders, exceeds the fair value of the net assets including identifiable intangibles of FSB at the effective date will be reported as goodwill. In accordance with current accounting guidance, goodwill is not amortized and will be evaluated for impairment at least annually. Identified intangibles will be amortized over their estimated lives. Further, the acquisition method of accounting results in the operating results of FSB being included in the operating results of Evans from the closing date going forward.

Public Trading Market (page 90)

Evans common stock is listed on NYSE under the symbol “EVBN.” FSB common stock is listed on the Nasdaq under the symbol “FSBC.” Upon completion of the merger, FSB common stock will be delisted from the Nasdaq and thereafter will be deregistered under the Exchange Act. The Evans common stock issuable in the merger will be listed on NYSE.

Appraisal and Dissenters’ Rights (page 90)

 

Under

Maryland law and the FSB Charter, FSB stockholders will not be entitled to exercise any appraisal or dissenters’ rights in connection with the mergers.

Agreement Not to Solicit Other Offers (page 104)

FSB has agreed that it and its subsidiaries will not, and will cause their respective representatives not to, directly or indirectly:

 

   

solicit, initiate, encourage (including by providing information or assistance), facilitate or induce any acquisition proposal (as defined in the section entitled “The Merger Agreement — Agreement Not to Solicit Other Offers”);

 

   

engage or participate in any discussions or negotiations regarding, or furnish or cause to be furnished to any person any information or data in connection with, or take any other action to facilitate any inquiries or the making of any offer or proposal that constitutes, or may reasonably be expected to lead to, an acquisition proposal (except to notify a person that has made an acquisition proposal of the existence of the acquisition proposal provisions of the merger agreement);

 

   

adopt, approve, agree to, accept, endorse or recommend any acquisition proposal; or

 

   

approve, agree to, accept, endorse or recommend, or propose to approve, agree to, accept, endorse or recommend any acquisition agreement (as defined in the section entitled “The Merger Agreement—Agreement Not to Solicit Other Offers”) contemplating or otherwise relating to any acquisition transaction.

FSB Special Meeting and Recommendation of the FSB Board of Directors (page 105)

FSB has agreed to hold a meeting of its stockholders as promptly as reasonably practicable after the registration statement of which this proxy statement/prospectus is a part is declared effective by the SEC for the purpose of obtaining the FSB stockholder approval.

The FSB board of directors has agreed to recommend to the FSB stockholders the approval of the merger proposal, to include such recommendation in this proxy statement/prospectus and to use its reasonable best efforts to obtain the FSB stockholder approval. FSB has agreed that neither the FSB board of directors nor any committee thereof will (a) withhold, withdraw, qualify or modify such recommendation in any manner adverse to Evans, (b) fail to make such recommendation or otherwise submit the merger proposal to the FSB stockholders without such recommendation, (c) adopt, approve, agree to, accept, recommend or endorse an acquisition proposal, (d) fail to publicly and without qualification (i) recommend against any acquisition proposal or (ii) reaffirm the recommendation of the merger proposal within ten business days (or such fewer number of days

 

15


Table of Contents

remaining prior to the FSB special meeting) after an acquisition proposal is made public or any request by Evans to do so, (e) take any action or make any public statement, filing or release inconsistent with such recommendation, or (f) publicly propose to do any of the foregoing, which, collectively and individually, we refer to as a change in recommendation.

However, at any time prior to the FSB special meeting, the FSB board of directors may submit the merger agreement without recommendation or may change its recommendation, if FSB has received a superior proposal (as defined in the section entitled “The Merger Agreement—FSB Special Meeting and Recommendation of the FSB Board of Directors”) (after giving effect to any revised offer from Evans), and the FSB board of directors has determined in good faith, after consultation with its financial advisors and outside legal counsel, that it would be a violation of the directors’ fiduciary duties under applicable law to make or continue to make the recommendation to approve the merger proposal, in which event, the board of directors of FSB may communicate the basis for its lack of such recommendation; provided, that the FSB board of directors may not take such actions unless:

 

   

FSB has complied in all material respects with its non-solicit obligations described above;

 

   

FSB gives Evans at least three business days’ notice of its intention to make a change in recommendation and a reasonable description of the events or circumstances giving rise to its determination to take such action;

 

   

during such three business day period, FSB has, and has caused its financial advisors and outside legal counsel to, consider and negotiate with Evans in good faith (to the extent Evans desires to so negotiate) regarding any proposals, adjustments or modifications to the terms and conditions of the merger agreement proposed by Evans; and

 

   

the FSB board of directors has determined in good faith, after consultation with its financial advisors and outside legal counsel and considering the results of such negotiations described above and giving effect to any proposals, amendments or modifications proposed by Evans that such superior proposal remains a superior proposal and that it would nevertheless be a violation of the directors’ fiduciary duties under applicable law to make or continue to make the recommendation to approve the merger proposal.

Any material amendment to any acquisition proposal will require a new determination and notice period.

Conditions to Consummation of the Mergers (page 107)

The respective obligations of each party to consummate the mergers and the other transactions contemplated by the merger agreement are subject to the satisfaction or waiver at or prior to the effective time of the following conditions:

 

   

the approval of the merger proposal by the FSB stockholders;

 

   

the receipt of all required regulatory permits or consents from the Federal Reserve, the OCC, NYDFS, the FDIC and any other regulatory authority, and any other regulatory permits or consents contemplated by the merger agreement the failure of which to obtain would reasonably be expected to have, either individually or in the aggregate, a material adverse effect on Evans and FSB (considered as a consolidated entity), in each case required to consummate the transactions contemplated by the merger agreement;

 

   

the absence of any law or order (whether temporary, preliminary or permanent) by any court or regulatory authority of competent jurisdiction prohibiting, restricting or making illegal the consummation of the transactions contemplated by the merger agreement (including the mergers);

 

   

the effectiveness of the registration statement of which this proxy statement/prospectus is a part under the Securities Act, and there being no stop order, action, suit, proceeding or investigation by the SEC to suspend the effectiveness of the registration statement initiated and continuing; and

 

16


Table of Contents
   

the approval of the listing on NYSE of the Evans common stock to be issued pursuant to the merger, subject to official notice of issuance.

Each party’s obligation to consummate the mergers is also subject to the satisfaction or waiver at or prior to the effective time of the following conditions:

 

   

the accuracy of the representations and warranties of the other party in the merger agreement as of the date of the merger agreement and as of the closing date, subject to the materiality standards provided in the merger agreement;

 

   

the performance by the other party in all material respects of all obligations of such party required to be performed by it under the merger agreement at or prior to the effective time;

 

   

the receipt of a certificate from the other party to the effect that the two conditions described above have been satisfied;

 

   

the receipt by each party of a written opinion of its counsel to the effect that the merger and the second merger, taken together, will constitute a “reorganization” within the meaning of Section 368(a) of the Code; and

 

   

in the case of Evans, the receipt of requisite regulatory approvals without the imposition of a burdensome condition.

The parties cannot be certain of when, or if, the conditions to the mergers will be satisfied or waived, or that the merger will be completed in the second quarter of 2020 or at all. As of the date of this proxy statement/prospectus, the parties have no reason to believe that any of these conditions will not be satisfied.

Termination of the Merger Agreement (page 107)

The merger agreement may be terminated and the merger abandoned at any time prior to the effective time (notwithstanding the approval of the merger agreement by FSB stockholders) by mutual written agreement, or by either party in the following circumstances:

 

   

any regulatory authority denies a requisite regulatory approval, or any law or order permanently restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by the merger agreement becomes final and nonappealable, so long as the party seeking to terminate the merger agreement has used its reasonable best efforts to contest, appeal and remove such law or order;

 

   

the FSB stockholders fail to vote their approval of the merger proposal, which we refer to as a no-vote termination;

 

   

the merger has not been consummated by October 31, 2020, which we refer to as the outside date, if the failure to consummate the transactions contemplated by the merger agreement on or before such date is not caused by the terminating party’s breach of the merger agreement, which we refer to as an outside date termination;

 

   

if there was a breach of any of the covenants or agreements or any of the representations or warranties (or any such representation or warranty ceases to be true) set forth in the merger agreement on the part of FSB, in the case of a termination by Evans, or Evans, in the case of a termination by FSB, which breach or failure to be true, either individually or in the aggregate with all other breaches by such party (or failures of such representations or warranties to be true), would constitute, if occurring or continuing on the closing date, the failure of a Evans or FSB condition to closing, respectively, and is not cured within 45 days following written notice or by its nature or timing cannot be cured during such period (or such fewer days as remain prior to the outside date); provided, that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained in the merger agreement, which we refer to as a breach termination; or

 

17


Table of Contents
   

if any regulatory authority requests that Evans, Evans Bank, FSB, FSB Bank or any of their respective affiliates withdraw (other than for technical reasons), and not be permitted to resubmit within 60 days, any application with respect to a requisite regulatory approval.

In addition, Evans may terminate the merger agreement if:

 

   

the FSB board of directors fails to recommend that the FSB stockholders approve the merger proposal, effects a change in recommendation, breaches its non-solicitation obligations with respect to acquisition proposals in any respect adverse to Evans or fails to call, give notice of, convene and/or hold the FSB special meeting in accordance with the merger agreement, which, collectively, we refer to as an FSB board breach termination; or

 

   

if any regulatory authority grants a requisite regulatory approval but such requisite regulatory approval contains, results or would reasonably be expected to result in, the imposition of a burdensome condition.

Termination Fee (page 108)

FSB will pay Evans a $1,400,000 termination fee if:

 

   

(1) either FSB or Evans effects (i) a no-vote termination or (ii) effects an outside date termination and the FSB stockholder approval has not been obtained, or (2) Evans effects a breach termination and, in each case, and prior to such termination, any person has made an acquisition proposal or has publicly announced an intention (whether or not conditional) to make an acquisition proposal, and within 12 months of such termination, FSB consummates an acquisition transaction or enters into an acquisition agreement with respect to an acquisition transaction, whether or not such acquisition transaction is subsequently consummated, whether or not relating to the same acquisition proposal that had been made or publicly announced prior to such termination; or

 

   

Evans effects an FSB board breach termination.

If FSB fails to pay any termination fee payable when due, then FSB must pay to Evans its costs and expenses (including attorneys’ fees) in connection with collecting such fee, together with interest on the amount of such fee at the prime rate of Citibank, N.A. from the date such payment was due under the merger agreement until the date of payment.

Voting Agreements (page 109)

In connection with entering into the merger agreement, each of the directors of FSB and certain FSB executive officers, in their capacities as individuals, have separately entered into a FSB voting agreement, pursuant to which they agreed to vote their beneficially owned shares of FSB common stock in favor of the merger proposal and certain related matters and against alternative transactions. As of the FSB record date, shares constituting approximately 9.47% of the FSB common stock entitled to vote at the FSB special meeting are subject to voting agreements.

Material U.S. Federal Income Tax Consequences Relating to the Mergers (page 111)

As a condition to the respective obligations of Evans and FSB to each complete the mergers, Evans will receive a legal opinion from Covington and FSB will receive a legal opinion from Luse Gorman, each dated as of the closing date, and each to the effect that the merger and second merger, taken together, qualify as a “reorganization” within the meaning of Section 368(a) of the Code.

 

18


Table of Contents

If the merger and second merger, taken together, qualify as a reorganization within the meaning of Section 368(a) of the Code, for U.S. federal income tax purposes:

 

   

a U.S. holder (as defined in the section entitled “Material U.S. Federal Income Tax Consequences Relating to the Mergers”) of FSB common stock receiving solely Evans common stock (except for cash received in lieu of fractional shares of Evans common stock) in exchange for such FSB common stock generally will not recognize any gain or loss upon receiving Evans common stock;

 

   

a U.S. holder of FSB common stock receiving solely cash in exchange for such FSB common stock generally will recognize gain or loss in an amount equal to the difference between the amount of cash received and the U.S. holder’s aggregate tax basis in the shares of FSB common stock surrendered; and

 

   

a U.S. holder of FSB common stock receiving a combination of Evans common stock and cash in exchange for such FSB common stock generally will (1) not recognize any loss upon surrendering its FSB common stock and (2) recognize gain upon surrendering its FSB common stock equal to the excess, if any, of (a) the sum of the amount of cash consideration received plus the fair market value (determined as of the effective time) of the Evans common stock received over (b) such U.S. holder’s aggregate tax basis in the shares of FSB common stock surrendered, but only to the extent of the amount of cash consideration received.

U.S. holders of FSB common stock receiving cash in lieu of fractional shares of Evans common stock will generally recognize gain or loss equal to the difference between the amount of cash received instead of a fractional share and the basis in its fractional share of Evans common stock.

For further information, see the section entitled “Material U.S. Federal Income Tax Consequences Relating to the Mergers.” 

The U.S. federal income tax consequences described above may not apply to all FSB stockholders. Your tax consequences will depend on your individual situation. Accordingly, we strongly urge you to consult your independent tax advisor for a full understanding of the particular tax consequences of the mergers to you.

Comparison of Stockholders’ Rights (page 114)

Upon completion of the merger, the rights of former FSB stockholders will be governed by the Evans charter and the Evans bylaws. Evans is organized under New York law, while FSB is organized under Maryland law. The rights associated with FSB common stock are different from the rights associated with Evans common stock. Please see the section entitled “Comparison of Stockholders’ Rights” for a discussion of the different rights associated with Evans common stock.

Risk Factors (page 36)

Before voting at the FSB special meeting, you should carefully consider all of the information contained in or incorporated by reference into this proxy statement/prospectus, including the risk factors set forth in the section entitled “Risk Factors” and described in Evans’ Annual Report on Form 10-K for the year ended on December 31, 2018, Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, and other reports filed by Evans with the SEC, which are incorporated by reference into this proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information.”

 

19


Table of Contents

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF EVANS

The following table sets forth highlights from Evans’ consolidated financial data as of and for the nine months ended September 30, 2019 and 2018 and as of and for each of the five years ended December 31, 2018. Results from past periods are not necessarily indicative of results that may be expected for any future period. The results of operations for the nine months ended September 30, 2019 and 2018 are not necessarily indicative of the results of operations for the full year or any other interim period. Evans’ management prepared the unaudited information on the same basis as it prepared Evans’ audited consolidated financial statements. In the opinion of Evans’ management, this information reflects all adjustments necessary for a fair presentation of this data for those dates. You should read this information in conjunction with Evans’ consolidated financial statements and related notes included in Evans’ Annual Report on Form 10-K for the year ended December 31, 2018 and its Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, each of which is incorporated by reference in this proxy statement/prospectus and from which this information is derived. See the section entitled “Where You Can Find More Information.”

 

    Nine Months Ended
September 30,
    Years Ended December 31,  

(in thousands, except

for per share data)

  2019     2018     2018     2017     2016     2015     2014  

Balance Sheet Data

             

Assets

  $ 1,455,732     $ 1,380,923     $ 1,388,207   $ 1,295,633   $ 1,100,709   $ 939,107   $ 846,809

Interest-earning assets

    1,359,682       1,297,166       1,304,256     1,214,806     1,030,113     873,450     785,302

Investment securities

    136,977       137,909       133,789     149,152     97,205     98,758     97,132

Loans and leases, net

    1,204,410       1,139,070       1,141,146     1,051,296     928,596     761,101     683,131

Deposits

    1,258,806       1,215,623       1,215,058     1,051,229     939,974     802,982     707,635

Borrowings

    28,748       24,309       24,472     108,869     49,689     32,151     38,808

Stockholders’ equity

    144,869       125,660       131,646     118,342     96,748     91,256     85,788

Income Statement Data

             

Net interest income

  $ 39,263     $ 35,734     $ 48,107   $ 42,017   $ 35,248   $ 31,804   $ 31,099

Non-interest income

    14,089       12,189       15,227     13,003     11,252     13,720     10,273

Non-interest expense

    35,649       31,861       43,293     38,594     35,096     32,698     31,252

Net income

    13,266       11,905       16,356     10,479     8,272     7,843     8,187

Per Share Data

             

Earnings per share - basic

  $ 2.71     $ 2.48     $ 3.40   $ 2.21   $ 1.93   $ 1.85   $ 1.96

Earnings per share - diluted

    2.68       2.41       3.32     2.16     1.90     1.82     1.92

Cash dividends

    1.04       0.92       0.92     0.80     0.76     0.72     0.65

Book value

    29.44       26.03       27.13     24.74     22.50     21.44     20.41

Performance Ratios

             

Return on average assets

    0.92     0.89     1.20     0.89     0.80     0.87     0.98

Return on average equity

    9.58     9.73     13.20     9.11     8.74     8.82     9.84

Net interest margin

    3.87     3.80     3.77     3.80     3.67     3.80     4.01

Efficiency ratio*

    66.20     66.00     66.87     68.50     74.03     71.83     70.83

Dividend payout ratio

    38.38     37.10     27.06     36.20     39.38     38.92     33.16

Capital Ratios

             

Tier 1 capital to average assets

    10.11     9.60     9.73     10.11     9.49     10.45     10.84

Equity to assets

    9.95     9.10     9.48     9.13     8.79     9.72     10.13

 

20


Table of Contents
    Nine Months Ended
September 30,
    Years Ended December 31,  

(in thousands, except

for per share data)

  2019     2018     2018     2017     2016     2015     2014  

Asset Quality Ratios

             

Total non-performing assets to total assets

    0.95     1.67     1.37     1.06     1.09     1.71     1.25

Total non-performing loans and leases to total loans and leases

    1.13     2.00     1.64     1.29     1.28     2.07     1.52

Net charge-offs (recoveries) to average loans and leases

    (0.19 )%      0.10     0.06     0.07     0.02     0.12     0.03

Allowance for loan and lease losses to total loans and leases

    1.26     1.32     1.28     1.32     1.48     1.66     1.80

 

*

The calculation of the efficiency ratio excludes amortization of intangibles and gains and losses on tax credit investments.

 

21


Table of Contents

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF FSB

The following selected consolidated financial information for the fiscal years ended December 31, 2014 through December 31, 2018 is derived from audited financial statements of FSB. The financial information as of and for the nine months ended September 30, 2019 and 2018 are derived from unaudited financial statements, which financial statements include, in the opinion of FSB’s management, all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of those results. The results of operations for the nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2019, and you should not assume the results of operations for any past periods indicate results for any future period. The following information is only a summary and you should read it in conjunction with FSB’s consolidated financial statements and notes, which are included in Annex E hereto, and in conjunction with FSB’s “FSB’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Annex D hereto.

 

     At
September 30,
2019
     At December 31,  
     2018      2017      2016      2015      2014  
     (In thousands)  

Selected Financial Condition Data:

 

Total assets

   $ 324,810      $ 328,269      $ 314,382      $ 273,593      $ 255,807      $ 246,194  

Cash and cash equivalents

     5,216        6,291        10,397        7,407        6,147        4,335  

Securities available for sale

     18,000        18,331        18,313        17,747        19,968        21,982  

Securities held to maturity

     6,011        6,052        6,575        7,420        12,979        17,402  

Loans, net

     276,711        281,741        262,711        226,192        201,830        188,830  

Loans held for sale

     3,690        2,133        2,770        2,059        3,880        2,961  

Deposits

     232,883        222,615        216,691        182,934        185,561        175,307  

Borrowings

     56,262        71,826        64,447        56,813        46,092        47,925  

Stockholders’ equity

     31,917        31,513        31,056        31,775        21,760        21,204  

 

     For the Nine Months
Ended September 30,
   

 

     For the Years Ended December 31,  
   2019     2018      2018      2017      2016      2015      2014  
     (In thousands)  

Selected Operating Data:

                   

Interest and dividend income

   $ 9,863     $ 9,248      $ 12,540      $ 10,732      $ 9,317      $ 8,920      $ 8,653  

Interest expense

     3,703       2,823        3,979        2,778        2,156        1,995        1,845  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income

     6,160       6,425        8,561        7,954        7,161        6,925        6,808  

Provision for loan losses

     175       225        300        271        180        158        127  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income after provision for loan losses

     5,985       6,200        8,261        7,683        6,981        6,767        6,681  

Other income

     1,352       2,099        2,717        3,576        3,655        2,835        2,581  

Other expense

     7,377       8,183        10,811        10,641        9,497        8,953        8,299  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income (loss) before income taxes

     (40     116        167        618        1,139        649        963  

Provision (benefit) for income taxes

     (3     24        32        407        285        136        303  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss)

   $ (37   $ 92      $ 135      $ 211      $ 854      $ 513      $ 660  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Earnings (loss) per share

                   

(basic and diluted)

   $ (0.02   $ 0.05      $ 0.07      $ 0.11      $ 0.45      $ 0.29      $ 0.38  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

22


Table of Contents
    At or For the Nine
Months Ended
September 30,
    At or For the Years Ended December 31,  
    2019     2018     2018     2017     2016     2015     2014  

Selected Financial Ratios and Other Data:

             

Performance Ratios:

             

Return (loss) on average assets

    (0.02 )%      0.04     0.04     0.07     0.33     0.21     0.27

Return (loss) on average equity

    (0.16 )%      0.39     0.43     0.66     3.30     2.36     3.15

Interest rate spread (1)

    2.42     2.67     2.63     2.71     2.76     2.83     2.88

Net interest margin (2)

    2.62     2.82     2.79     2.85     2.87     2.91     2.95

Efficiency ratio (3)

    100.55     98.60     98.48     94.51     89.30     93.24     89.61

Other expense to average total assets

    3.01     3.45     3.40     3.61     3.64     3.59     3.44

Average interest-earning assets to average interest-bearing liabilities

    112.58     111.79     112     113     113     109     109

Asset Quality Ratios:

             

Non-performing assets as a percent of total assets

    0.32     0.03     0.03     0.05     0.00     0.03     0.03

Non-performing loans as a percent of total loans

    0.38     0.04     0.03     0.06     0.00     0.04     0.04

Allowance for loan losses as a percent of non-performing loans

    166.16     1,468.37     1,564.55     825.59     0.00     994.92     882.00

Allowance for loan losses as a percent of total loans

    0.62     0.53     0.55     0.48     0.44     0.40     0.34

Net charge-offs to average outstanding loans during the year

    —       —       —       —       —       —       —  

Capital Ratios: (4)

             

Common equity tier 1 capital (to risk weighted assets)

    15.62     14.86     14.91     15.44     17.79     14.53     N/A  

Tier 1 leverage (core) capital (to adjusted tangible assets)

    9.13     9.14     9.07     9.47     10.67     7.85     7.24

Tier 1 risk-based capital (to risk weighted assets)

    15.62     14.86     14.91     15.44     17.79     14.53     14.65

Total risk-based capital (to risk weighted assets)

    16.53     15.62     15.70     16.11     18.41     15.12     15.19

Average equity to average total assets

    9.71     9.92     9.87     10.92     9.92     8.73     8.69

 

(1)

Represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the period.

(2)

The net interest margin represents net interest income as a percent of average interest-earning assets for the period.

(3)

The efficiency ratio represents non-interest expense divided by the sum of net interest income and non-interest income.

(4)

Capital ratios are for FSB Bank. FSB was not subject to capital requirements for any time period in the table.

 

23


Table of Contents

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION

The following unaudited pro forma combined condensed financial statements are based on the separate historical financial statements of Evans and FSB and give effect to the potential merger of Evans and FSB, including pro forma assumptions and adjustments related to the mergers, as described in the accompanying notes to the unaudited pro forma combined condensed financial statements. The unaudited pro forma combined condensed balance sheet as of September 30, 2019 is presented as if the mergers occurred on September 30, 2019. The unaudited pro forma combined condensed statements of income for the year ended December 31, 2018 and the nine months ended September 30, 2019 are presented as if the mergers occurred on January 1, 2018. The historical consolidated financial information has been adjusted on a pro forma basis to reflect factually supportable items that are directly attributable to the mergers and, with respect to the statements of earnings only, expected to have a continuing impact on consolidated results of operations.

The unaudited pro forma combined condensed financial statements have been prepared using the acquisition method of accounting for business combinations under U.S. Generally Accepted Accounting Principles, or GAAP. Evans is the acquirer for accounting purposes. Certain reclassifications have been made to the historical financial statements of FSB to conform to the presentation in Evans’ financial statements.

A final determination of the fair values of FSB’s assets and liabilities, which cannot be made prior to the completion of the mergers, will be based on the actual net tangible and intangible assets of FSB that exist as of the closing date. Consequently, fair value adjustments and amounts preliminarily allocated to goodwill and identifiable intangibles could change significantly from those allocations used in the unaudited pro forma combined condensed financial statements presented herein and could result in a material change in amortization of acquired intangible assets. In addition, the value of the final merger consideration will be based on the closing price of Evans common stock on the closing date. The closing price of Evans common stock on December 18, 2019 was used for purposes of presenting the pro forma combined condensed financial information.

In connection with the plan to integrate the operations of Evans and FSB following the completion of the mergers, Evans anticipates that nonrecurring charges, such as costs associated with systems implementation, severance, accelerated vesting of equity awards and other costs related to exit or disposal activities, will be incurred. Evans is not able to determine the timing, nature and amount of these charges as of the date of this proxy statement/prospectus. However, these charges will affect the results of operations of Evans and FSB, as well as those of the combined company following the completion of the mergers, in the period in which they are recorded. The unaudited pro forma combined condensed statements of income do not include the effects of the costs associated with any restructuring or integration activities resulting from the mergers, as they are nonrecurring in nature and not factually supportable at this time. Additionally, the unaudited pro forma adjustments do not give effect to any nonrecurring or unusual restructuring charges that may be incurred as a result of the integration of the two companies or any anticipated disposition of assets that may result from such integration.

The actual amounts recorded as of the completion of the mergers may differ materially from the information presented in these unaudited pro forma combined condensed financial statements as a result of:

 

   

changes in the trading price for the Evans common stock;

 

   

net cash used or generated in Evans’ or FSB’s operations between the signing of the merger agreement and completion of the mergers;

 

   

changes in the fair values of Evans’ or FSB’s assets and liabilities;

 

   

other changes in Evans’ or FSB’s net assets that occur prior to the completion of the mergers, which could cause material changes in the information presented below; and

 

   

the actual financial results of the combined company.

 

24


Table of Contents

The unaudited pro forma combined condensed financial statements are presented for illustrative purposes only. The unaudited pro forma combined condensed financial statements are not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the mergers been completed as of the dates indicated or that may be achieved in the future. The preparation of the unaudited pro forma combined condensed financial statements and related adjustments required management to make certain assumptions and estimates. The unaudited pro forma combined condensed financial statements should be read together with:

 

   

the accompanying notes to the unaudited pro forma combined condensed financial statements;

 

   

Evans separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2018, included in Evans’ Annual Report on Form 10-K for the year ended December 31, 2018, incorporated by reference herein;

 

   

Evans separate unaudited historical consolidated financial statements and accompanying notes as of and for the three and nine months ended September 30, 2019, included in Evans’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, incorporated by reference herein;

 

   

FSB’s consolidated financial statements and related notes as of and for the years ended December 31, 2018 and 2017, as of and for the three and nine months ended September 30, 2019, included in Annex E hereto, and FSB’s “FSB’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Annex D hereto; and

 

   

other information pertaining to Evans and FSB contained in or incorporated by reference into this document. Please see the sections entitled “Selected Historical Consolidated Financial Data of Evans” and “Selected Historical Consolidated Financial Data of FSB.”

 

25


Table of Contents

EVANS BANCORP, INC./FSB BANCORP, INC.

UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET

AS OF SEPTEMBER 30, 2019

(Dollars in thousands, except per share amounts)

 

     Evans
9/30/2019
(as reported)
    FSB
9/30/2019
(as
reported)
    Pro Forma
Adj
    Notes     Pro Forma
9/30/2019
Combined
 

ASSETS

          

Cash and cash equivalents

   $  34,344     $  5,216     ($ 22,389     (a   $  17,171  

Investment securities

     140,515       26,972       (89     (b     167,398  

Loans, net of allowance for loan losses

     1,204,410       280,401       1,109       (c     1,485,920  

Premises and equipment, net

     13,946       2,506       —           16,452  

Goodwill

     10,774       —         1,857       (d     12,631  

Intangible assets

     1,882       —         1,494       (e     3,376  

Other assets

     49,861       9,715       —           59,576  
  

 

 

   

 

 

   

 

 

     

 

 

 

Total Assets

   $ 1,455,732     $  324,810     ($ 18,018     $ 1,762,524  
  

 

 

   

 

 

   

 

 

     

 

 

 

LIABILITIES

          

Deposits

          

Noninterest-bearing

     271,633       11,401       —           283,034  

Interest-bearing

     987,173       221,482       1,047       (f )      1,209,702  
  

 

 

   

 

 

   

 

 

     

 

 

 

Total deposits

     1,258,806       232,883       1,047         1,492,736  
  

 

 

   

 

 

   

 

 

     

 

 

 

Other Liabilities

          

Borrowed funds

     17,417       56,262       549       (g )      74,228  

Other liabilities

     34,640       3,748       —           38,388  
  

 

 

   

 

 

   

 

 

     

 

 

 

Total other liabilities

     52,057       60,010       549         112,616  
  

 

 

   

 

 

   

 

 

     

 

 

 

Total liabilities

     1,310,863       292,893       1,596         1,605,352  
  

 

 

   

 

 

   

 

 

     

 

 

 

STOCKHOLDERS EQUITY

          

Preferred stock

     —         —         —           —    

Common Stock

     2,462       19       (19     (h     2,462  

Capital surplus

     62,736       15,998       1,503       (i     80,237  

Accumulated other comprehensive income

     (1,854     (20     20       (j     (1,854

Retained earnings

     81,525       16,175       (21,475     (k     76,225  

Treasury stock

     —         —         —           —    

Unearned ESOP shares, at cost

     —         (255     357       (l     102  
  

 

 

   

 

 

   

 

 

     

 

 

 

Total stockholders equity

     144,869       31,917       (19,614       157,172  
  

 

 

   

 

 

   

 

 

     

 

 

 

Total liabilities and stockholders equity

     1,455,732       324,810       (18,018       1,762,524  
  

 

 

   

 

 

   

 

 

     

 

 

 

 

26


Table of Contents

Balance Sheet Pro Forma Accounting Adjustments Notes as of September 30, 2019

 

(a)

  

Adjustments to cash and cash equivalents:

  
  

To reflect the total anticipated after tax merger related costs borne by both Evans and FSB

   $ (5,300
  

To reflect estimated cash consideration

     (17,446
  

To reflect the liquidation of the remaining unallocated shares in the ESOP

     357  
     

 

 

 
      $ (22,389

(b)

  

Adjustment to investment securities:

  
  

To reflect estimated fair value of FSB’s held to maturity investment securities

   $ (89

(c)

  

Adjustments to loans, net:

  
  

To eliminate FSB’s allowance for loan and lease losses

   $ 1,736  
  

To reflect estimated fair value of loan portfolio comprised of a credit mark of $3.6 million and an interest rate mark of $2.4 million

     (1,219
  

To eliminate FSB’s deferred loan and lease fees

     592  
     

 

 

 
      $ 1,109  

(d)

  

Adjustment to goodwill:

  
  

To reflect goodwill for amount of consideration paid in excess of fair value of assets received and liabilities assumed

   $ 1,857  

(e)

  

Adjustment to intangible assets, net:

  
  

To record fair value estimate of intangible assets specifically identified Core Deposit Intangibles

   $ 1,494  

(f)

  

Adjustment to interest-bearing deposits:

  
  

To reflect estimated fair value of FSB’s deposits

   $ 1,047  

(g)

  

Adjustment to borrowed funds:

  
  

To reflect estimated fair value of FSB’s borrowed funds

   $ 549  

(h)

  

Adjustment to common stock:

  
  

To eliminate FSB common stock

   $ (19

(i)

  

Adjustments to additional paid in capital:

  
  

To eliminate FSB’s additional paid in capital

   $ (15,998
  

To reflect issuance of shares of Evans common stock in the merger

     17,327  
  

To reflect payment of the stock option awards that fully vest upon closing of the merger

     174  
     

 

 

 
      $ 1,503  

(j)

  

Adjustment to accumulated other comprehensive income:

  
  

To eliminate FSB’s accumulated other comprehensive income

   $ 20  

(k)

  

Adjustments to retained earnings:

  
  

To eliminate FSB’s retained earnings

   $ (16,175
  

To reflect the total anticipated after tax merger related costs borne by both Evans and FSB

     (5,300
     

 

 

 
      $ (21,475

(l)

  

Adjustments to unearned ESOP shares:

  
  

To reflect the liquidation of the remaining unallocated shares in the ESOP

   $ 357  

 

27


Table of Contents

Preliminary purchase price allocation (in thousands, except per share data)

 

Pro forma stock consideration:

  

Shares of FSB common stock outstanding of 1,940,661 as of September 30, 2019 at exchange ratio of 0.4394

     426  

Price per share, based upon Evans’ closing price as of December 18, 2019

   $ 40.64  
  

 

 

 

Total pro forma stock consideration

     17,327  

Cash consideration:

     17,272  
  

 

 

 

Total consideration to holders of FSB common stock

     34,600  

Economic value of FSB options (172,080 at weighted average exercise price of $16.79)

     174  
  

 

 

 

Total pro forma purchase price

   $ 34,774  

 

     9/30/2019
(as reported)
     Pro Forma
Adj
    9/30/2019
(as adjusted)
 

ASSETS OF ACQUIRED COMPANY (FSB)

       

Cash and cash equivalents

   $  5,216        —       $  5,216  

Investment securities

     26,972        (89     26,883  

Loans, net of allowance for loan losses

     280,401        1,109       281,510  

Premises and equipment

     2,506        —         2,506  

Goodwill

     —          —         —    

Intangible assets

     —          1,494       1,494  

Other assets

     9,715        —         9,715  
  

 

 

    

 

 

   

 

 

 

Total Assets

   $ 324,810      $ 2,514     $ 327,324  
  

 

 

    

 

 

   

 

 

 

LIABILITIES OF ACQUIRED COMPANY (FSB)

       

Deposits

     232,883        1,047       233,930  

Other borrowed funds

     56,262        549       56,811  

Other liabilities

     3,748        —         3,748  
  

 

 

    

 

 

   

 

 

 

Total liabilities assumed

     292,893        1,596       294,489  
  

 

 

    

 

 

   

 

 

 

Net assets acquired

          32,835  

Preliminary pro forma goodwill

          1,857  

 

28


Table of Contents

EVANS BANCORP, INC./FSB BANCORP, INC.

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

(Dollars in thousands, except per share amounts)

 

     Evans
9/30/2019
(as reported)
     FSB
9/30/2019
(as reported)
    Pro Forma
Adj
    Notes     Pro Forma
9/30/2019
Combined
 

INTEREST INCOME

           

Interest and fees on loans

   $ 45,149      $ 9,252       610       (a   $ 55,011  

Interest on investment securities

     2,999        527       (10     (b     3,516  

Other interest income

     564        84       —           648  
  

 

 

    

 

 

   

 

 

     

 

 

 

Total interest income

   $ 48,712      $ 9,863     $ 600       $ 59,175  
  

 

 

    

 

 

   

 

 

     

 

 

 

INTEREST EXPENSE

           

Interest on deposits

     8,883        2,568       157       (c     11,608  

Interest on borrowed funds

     566        1,135       206       (d     1,907  
  

 

 

    

 

 

   

 

 

     

 

 

 

Total interest expense

     9,449        3,703       363         13,515  
  

 

 

    

 

 

   

 

 

     

 

 

 

Net interest income

     39,263        6,160       237         45,660  

Provision for loan losses

     197        175       —           372  
  

 

 

    

 

 

   

 

 

     

 

 

 

Net interest income after provision for loan losses

     39,066        5,985       237         45,288  

NONINTEREST INCOME

           

Service fees

     1,822        104       —           1,926  

Fee income

     8,568        14       —           8,582  

Bank owned life insurance

     492        45       —           537  

Realized gain on sale of loans

     105        620       —           725  

Mortgage fee income

     —          443       —           443  

Other

     3,102        126       —           3,228  
  

 

 

    

 

 

   

 

 

     

 

 

 

Total noninterest income

     14,089        1,352       —           15,441  
  

 

 

    

 

 

   

 

 

     

 

 

 

NONINTEREST EXPENSE

           

Salaries, benefits and other compensation

     22,273        4,559       —           26,832  

Occupancy expense

     2,561        797       —           3,358  

Other operating expense

     10,815        2,021       112       (e     12,948  
  

 

 

    

 

 

   

 

 

     

 

 

 

Total noninterest expense

     35,649        7,377       112         43,138  
  

 

 

    

 

 

   

 

 

     

 

 

 

Income before taxes

     17,506        (40     125         17,591  

Income tax provision

     4,240        (3     32       (f     4,269  
  

 

 

    

 

 

   

 

 

     

 

 

 

Net income

     13,266        (37     92         13,321  

Basic earnings per share

     2.71              2.51  
  

 

 

          

 

 

 

Diluted earnings per share

     2.68              2.47  
  

 

 

          

 

 

 

Weighted average shares outstanding for basic EPS

     4,889,029          426,363       (g     5,315,392  

Adjusted weighted average shares outstanding for diluted EPS

     4,957,689          426,363       (g     5,384,052  

 

29


Table of Contents

Income Statement Pro Forma Accounting Adjustments Notes for the Nine Months Ended September 30, 2019

 

(a)

  

Adjustments to interest and fees on loans:

  
  

To reflect the interest income for accretion on purchased performing acquired loans based on estimated fair market value adjustment

   $ 610  

(b)

  

Adjustment to interest on investment securities:

  
  

To reflect the interest income for accretion on purchased performing acquired investments based on estimated fair market value adjustment

   $ (10

(c)

  

Adjustment to interest on deposit accounts:

  
  

To reflect amortization of the discount based on estimated fair market value adjustment

   $ 157  

(d)

  

Adjustment to interest on borrowed funds:

  
  

To reflect amortization of the discount based on estimated fair market value adjustment

   $ 206  

(e)

  

Adjustment to amortization of intangible assets:

  
  

To reflect estimated amortization of core deposit intangibles based on 10 year useful life

   $ 112  

(f)

  

Adjustment to income taxes:

  
  

To reflect the tax adjustment related to pro forma adjustments calculated at a 26% rate

   $ 32  

(g)

  

Adjustment to weighted average shares:

  
  

To reflect the increase in the weighted average shares in connection with the issuance of shares of Evans common stock in the merger (comprised of 1.94 million shares of FSB at a conversion rate of 0.4394)

     426,363  

 

30


Table of Contents

EVANS BANCORP, INC./FSB BANCORP, INC.

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2018

(Dollars in thousands, except per share amounts)

 

     Evans
12/31/2018
(as reported)
     FSB
12/31/2018
(as reported)
     Pro Forma
Adj
    Notes     Pro Forma
12/31/2018
Combined
 

INTEREST INCOME

            

Interest and fees on loans

   $ 53,282      $ 11,827        813       (a   $ 65,922  

Interest on investment securities

     3,903        662        (13     (b     4,552  

Other interest income

     427        51        —           478  
  

 

 

    

 

 

    

 

 

     

 

 

 

Total interest income

   $ 57,612      $ 12,540      $ 800       $ 70,952  
  

 

 

    

 

 

    

 

 

     

 

 

 

INTEREST EXPENSE

            

Interest on deposits

     8,416        2,591        209       (c     11,216  

Interest on borrowed funds

     1,089        1,388        275       (d     2,752  
  

 

 

    

 

 

    

 

 

     

 

 

 

Total interest expense

     9,505        3,979        484         13,968  
  

 

 

    

 

 

    

 

 

     

 

 

 

Net interest income

     48,107        8,561        316         56,984  

Provision for loan losses

     1,402        300        —           1,702  
  

 

 

    

 

 

    

 

 

     

 

 

 

Net interest income after provision for loan losses

     46,705        8,261        316         55,282  

NONINTEREST INCOME

            

Service fees

     2,176        149        —           2,325  

Fee income

     9,365        131        —           9,496  

Bank owned life insurance

     680        61        —           741  

Realized gain on sale of loans

     38        1,437        —           1,475  

Mortgage fee income

     —          743        —           743  

Other

     2,968        196        —           3,164  
  

 

 

    

 

 

    

 

 

     

 

 

 

Total noninterest income

     15,227        2,717        —           17,944  
  

 

 

    

 

 

    

 

 

     

 

 

 

NONINTEREST EXPENSE

            

Salaries, benefits and other compensation

     27,412        6,497        —           33,909  

Occupancy expense

     3,135        1,088        —           4,223  

Other operating expense

     12,746        3,226        149       (e     16,121  
  

 

 

    

 

 

    

 

 

     

 

 

 

Total noninterest expense

     43,293        10,811        149         54,253  
  

 

 

    

 

 

    

 

 

     

 

 

 

Income before taxes

     18,639        167        167         18,973  

Income tax provision

     2,283        32        43       (f     2,358  
  

 

 

    

 

 

    

 

 

     

 

 

 

Net income

     16,356        135        123         16,614  

Basic earnings per share

     3.40               3.17  
  

 

 

           

 

 

 

Diluted earnings per share

     3.32               3.10  
  

 

 

           

 

 

 

Weighted average shares outstanding for basic EPS

     4,814,882           426,363       (g     5,241,245  

Adjusted weighted average shares outstanding for diluted EPS

     4,933,743           426,363       (g     5,360,106  

 

31


Table of Contents

Income Statement Pro Forma Accounting Adjustments Notes for the Twleve Months Ended
December 31, 2018

 

(a)

  

Adjustments to interest and fees on loans:

  
  

To reflect the interest income for accretion on purchased performing acquired loans based on estimated fair market value adjustment

   $ 813  

(b)

  

Adjustment to interest on investment securities:

  
  

To reflect the interest income for accretion on purchased performing acquired investments based on estimated fair market value adjustment

   $ (13

(c)

  

Adjustment to interest on deposit accounts:

  
  

To reflect amortization of the discount based on estimated fair market value adjustment

   $ 209  

(d)

  

Adjustment to interest on borrowed funds:

  
  

To reflect amortization of the discount based on estimated fair market value adjustment

   $ 275  

(e)

  

Adjustment to amortization of intangible assets:

  
  

To reflect estimated amortization of core deposit intangibles based on 10 year useful life

   $ 149  

(f)

  

Adjustment to income taxes:

  
  

To reflect the tax adjustment related to pro forma adjustments calculated at a 26% rate

   $ 43  

(g)

  

Adjustment to weighted average shares:

  
  

To reflect the increase in the weighted average shares in connection with the issuance of shares of Evans common stock in the merger (comprised of 1.94 million shares of FSB at a conversion rate of 0.4394)

     426,363  

 

32


Table of Contents

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

The following table shows per common share data regarding basic and diluted earnings, cash dividends and book value for (a) Evans on a historical basis, (b) FSB on a historical basis, (c) Evans and FSB on a pro forma combined basis and (d) FSB on a pro forma equivalent basis.

The following pro forma information has been derived from and should be read in conjunction with Evans’ and FSB’s respective audited consolidated financial statements for the year ended December 31, 2018 and unaudited consolidated financial statements as of and for the nine months ended September 30, 2019, which is incorporated herein by reference, and, with respect to FSB, are included in Annex E hereto. This information is presented for illustrative purposes only. You should not rely on the pro forma combined or pro forma equivalent amounts as they are not necessarily indicative of the operating results or financial position that would have occurred if the mergers had been completed as of the dates indicated, nor are they necessarily indicative of the future operating results or financial position of the combined company. The pro forma information, although helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the benefits of expected cost savings, opportunities to earn additional revenue, the impact of restructuring and merger-related costs (except merger-related costs that are reflected in the unaudited pro forma combined condensed balance sheet included elsewhere herein), or other factors that may result as a consequence of the mergers and, accordingly, does not attempt to predict or suggest future results. The information below should be read in conjunction with the section entitled “Unaudited Pro Forma Combined Condensed Financial Information.”

 

     Evans      FSB     Pro
Forma
     Pro
Forma
 
     Historical      Historical     Combined      Per
Equivalent

FSB
Share (1)
 

Basic earnings (loss) per share

          

For the years ended December 31, 2018

   $ 3.40      $ 0.07     $ 3.17      $ 1.39  

For the nine months ended September 30, 2019

   $ 2.71      $ (0.02   $ 2.51      $ 1.10  

Diluted earnings (loss) per share

          

For the years ended December 31, 2018

   $ 3.32      $ 0.07     $ 3.10      $ 1.36  

For the nine months ended September 30, 2019

   $ 2.68      $ (0.02   $ 2.47      $ 1.09  

Cash dividends per share (2)

          

For the years ended December 31, 2018

   $ 0.92      $ 0.00     $ 0.92      $ 0.40  

For the nine months ended September 30, 2019

   $ 1.04      $ 0.00     $ 1.04      $ 0.46  

Book value per share

          

As of December 31, 2018

   $ 27.13      $ 17.07     $ 29.77      $ 13.08  

As of September 30, 2019

   $ 29.44      $ 17.17     $ 29.40      $ 12.92  

 

(1)

Calculated by multiplying the amounts under “Pro Forma Combined” column by the exchange ratio of 0.4394.

(2)

Pro forma combined cash dividends are based only upon Evans’ historical amounts.

 

33


Table of Contents

MARKET PRICE AND DIVIDENDS

Evans common stock trades on the NYSE under the symbol “EVBN.” FSB common stock trades on Nasdaq under the symbol “FSBC.” As of March 5, 2020, there were approximately 1,149 registered Evans common shareholders of record and approximately 164 registered FSB common shareholders of record.

Evans currently pays a semi-annual cash dividend of $0.52 per share, which is expected to continue, although the Evans board may change this dividend policy at any time. Evans shareholders will be entitled to receive dividends when and if declared by the Evans board out of funds legally available for dividends. The Evans board will consider Evans’ financial condition and level of net income, future prospects, economic condition, industry practices and other factors, including applicable banking laws and regulations, in determining whether to pay dividends in the future and the amount of such dividends.

FSB does not currently pay a cash dividend and FSB does not intend to pay a cash dividend in the foreseeable future.

The following table sets forth the closing sale prices per Evans common stock and FSB common stock on December 19, 2019, the last trading day completed before the public announcement of the signing of the merger agreement, and on March 5, 2020 the latest practicable date before the date of this proxy statement/prospectus.

 

     Evans
Common Stock
     FSB
Common Stock
 

December 19, 2019

   $ 40.48      $ 16.82  

March 5, 2020

   $ 36.33      $ 16.53  

 

34


Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this proxy statement/prospectus and the documents incorporated into it by reference that are considered “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Exchange Act, that involve substantial risks and uncertainties. When used in this proxy statement/prospectus, or in the documents incorporated by reference herein, the words “will,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “seek,” “look to,” “goal,” “target” and similar expressions identify such forward-looking statements. These forward-looking statements include, without limitation, statements relating to the impact Evans and FSB expect the mergers to have on the combined entities operations, financial condition, and financial results, and Evans’ and FSB’s expectations about their ability to successfully integrate their respective businesses and the amount of cost savings and other benefits Evans and FSB expect to realize as a result of the mergers. These forward-looking statements are based largely on the expectations of Evans’ and FSB’s respective management and are subject to a number of risks and uncertainties, including, but not limited to:

 

   

the possibility that the mergers do not close when expected or at all because required regulatory, stockholder or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all;

 

   

the failure to close for any other reason;

 

   

changes in Evans’ or FSB’s share price before closing;

 

   

the risk that the businesses of Evans and FSB will not be integrated successfully;

 

   

the possibility that the cost savings and any synergies or other anticipated benefits from the mergers may not be fully realized or may take longer to realize than expected;

 

   

disruption from the mergers making it more difficult to maintain relationships with employees, customers or other parties with whom Evans or FSB have business relationships;

 

   

diversion of management time on merger-related issues;

 

   

risks relating to the potential dilutive effect of the shares of Evans common stock to be issued in the mergers;

 

   

the reaction to the mergers of the companies’ customers, employees and counterparties; and

 

   

other factors, many of which are beyond the control of Evans and FSB.

We refer you to the additional risk factors that could cause results to differ materially from those described above contained in the Annual Report on Form 10-K filed by Evans for the year ended December 31, 2018, and any updates to those risk factors set forth in Evans’ Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings, which have been filed by Evans with the SEC and are available on the SEC’s website at www.sec.gov. We also refer you to the section entitled “Risk Factors” in this proxy statement/prospectus. Because of these and other uncertainties, actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein. All forward-looking statements, expressed or implied, included herein are expressly qualified in their entirety by the cautionary statements contained or referred to herein. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date on which they are made. Neither Evans nor FSB undertakes any obligation, and specifically declines any obligation, to publicly update or revise forward-looking information, whether as a result of new, updated information, future events or otherwise, except to the extent required by law.

 

35


Table of Contents

RISK FACTORS

In addition to general investment risks and the other information contained in or incorporated by reference into this proxy statement/prospectus, including the matters addressed under the section entitled “Cautionary Statement Regarding Forward-Looking Statements,” and the matters discussed under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of Evans’ Annual Report on Form 10-K for the year ended December 31, 2018 and any updates to those risk factors set forth in Evans’ Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings, which have been filed with the SEC, FSB stockholders should carefully consider the following factors in deciding whether to vote for the proposals presented in this proxy statement/prospectus. Please also see the section entitled “Where You Can Find More Information.”

Risks Relating to the Mergers

Because the market price of Evans common stock will fluctuate, the value of the stock consideration to be received by FSB stockholders who elect stock consideration is uncertain.

The market price of Evans common stock at the effective time may vary from the price of Evans common stock on the date the merger agreement was executed, on the date of this proxy statement/prospectus, and on the date of the FSB special meeting and at the effective time of the merger. Any change in the market price of Evans common stock prior to the completion of the mergers will affect the market value of the stock consideration that FSB stockholders will receive at the effective time. At the time of the FSB special meeting, FSB stockholders will not know or be able to calculate the value of the stock consideration they will receive at the effective time. Stock price changes may result from a variety of factors, including general market and economic conditions, changes in respective businesses, operations and prospects, and regulatory considerations, among other things. Many of these factors are beyond the control of Evans and FSB. FSB stockholders should obtain current market quotations for both shares of Evans common stock and FSB common stock before voting their shares at the FSB special meeting.

There will be no adjustment to the merger consideration based upon changes in the market price of Evans common stock or FSB common stock prior to the time the mergers are completed. The merger agreement cannot be terminated due to a change in the price of Evans common stock or FSB common stock. As a result, the value of the cash consideration may differ from the value of the stock consideration.

The elections made by holders of FSB common stock with respect to the types of merger consideration they would like to receive are subject to proration, and there can be no assurance that a stockholder will receive the type of merger consideration he or she elects.

Each holder of FSB common stock will be able to elect the type of merger consideration that he or she would like to receive for each of his or her shares of FSB common stock, including electing to receive the cash consideration for a portion of his or her shares of FSB common stock and receive the stock consideration for the remainder of his or her shares of FSB common stock. All such elections are subject to adjustment on a pro rata basis. The merger agreement provides that the aggregate amount of the cash consideration that holders of FSB common stock are entitled to receive is equal to the cash value. As a result, all elections may be subject to proration depending on the elections made by other holders of FSB common stock if the cash value is undersubscribed or oversubscribed. Proration will be applied so that ultimately approximately 50% of the shares of FSB common stock are treated as cash election shares and approximately 50% of the shares of FSB common stock are treated as stock election shares.

Accordingly, depending on the elections made by other FSB stockholders, if a holder of FSB common stock elects to receive all cash consideration pursuant to the merger, such holder may receive a portion of the merger consideration due to such holder in the form of stock consideration. If a holder of FSB common stock elects to

 

36


Table of Contents

receive all stock consideration pursuant to the merger, such holder may receive a portion of the merger consideration due to such holder in the form of cash consideration. Holders of FSB common stock who make an election to receive the stock consideration for some of their shares and the cash consideration for the remainder of their shares may receive different amounts or proportions of the stock consideration and the cash consideration than they elected.

If you are a FSB stockholder and you tender shares of FSB common stock to make an election, you will not be able to sell those shares unless you revoke your election prior to the election deadline.

If you are a FSB stockholder and want to make a valid cash election or stock election, you will have to deliver your stock certificates or book entry shares (or follow the procedures for guaranteed delivery), and a properly completed and signed form of election to the exchange agent prior to the election deadline. You will not be able to sell any shares of FSB common stock that you have delivered as part of your election unless you revoke your election before the election deadline by providing written notice to the exchange agent. If you do not revoke your election, you will not be able to liquidate your investment in FSB common stock for any reason until you receive the merger consideration. In the time between the election deadline and the effective time of the merger, the trading price of FSB common stock or Evans common stock may decrease, and you might otherwise want to sell your shares of FSB common stock to gain access to cash, make other investments, or reduce the potential for a decrease in the value of your investment. The date that you will receive your merger consideration depends on the effective time, which is uncertain. The effective time might be later than expected due to unforeseen events, such as delays in obtaining regulatory approvals.

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or cannot be met.

Before the transactions contemplated by the merger agreement, including the mergers, may be completed, various approvals must be obtained from bank regulatory authorities. In determining whether to grant these approvals, the applicable regulatory authorities consider a variety of factors, including the competitive impact of the proposal in the relevant geographic markets; financial, managerial and other supervisory considerations, including the future prospects, of each party; potential effects of the mergers on the convenience and needs of the communities to be served and the record of the insured depository institution subsidiaries under the Community Reinvestment Act of 1977 and the regulations promulgated thereunder, or the Community Reinvestment Act, including the subsidiaries’ overall compliance records and recent fair lending examinations; effectiveness of the parties in combatting money laundering activities; the extent to which the proposal would result in greater or more concentrated risks to the stability of the United States banking or financial system; and whether Evans controls or would after consummation of the mergers control deposits in excess of certain limits. These regulatory authorities may impose conditions on the granting of such approvals. Such conditions or changes and the process of obtaining regulatory approvals could have the effect of delaying completion of the mergers or of imposing additional costs or limitations on the combined company following the mergers. The regulatory approvals may not be received at all, may not be received in a timely fashion, or may contain conditions on the completion of the mergers that are not anticipated or cannot be met. Furthermore, such conditions or changes may constitute a burdensome condition that may allow Evans to terminate the merger agreement and Evans may exercise its right to terminate the merger agreement. If the consummation of the mergers is delayed, including by a delay in receipt of necessary regulatory approvals, the business, financial condition and results of operations of each party may also be materially and adversely affected. See the section entitled “The Mergers—Regulatory Approvals Required for the Mergers.”

Failure of the mergers to be completed, the termination of the merger agreement or a significant delay in the consummation of the mergers could negatively impact Evans and FSB.

The merger agreement is subject to a number of conditions which must be fulfilled in order to complete the mergers. Please see the section entitled “The Merger Agreement—Conditions to Consummation of the Mergers.”

 

37


Table of Contents

These conditions to the consummation of the mergers may not be fulfilled and, accordingly, the mergers may not be completed. In addition, if the mergers are not completed by October 31, 2020, either Evans or FSB may choose to terminate the merger agreement at any time after such date if the failure to consummate the transactions contemplated by the merger agreement is not caused by any breach of the merger agreement by the party electing to terminate the merger agreement, before or after FSB stockholders approval of the merger.

If the mergers are not consummated, the ongoing business, financial condition and results of operations of each party may be materially adversely affected and the market prices of Evans common stock and FSB common stock may decline significantly, particularly to the extent that the current market prices reflects a market assumption that the mergers will be consummated. If the consummation of the mergers is delayed, including by the receipt of a competing acquisition proposal, the business, financial condition and results of operations of each party may be materially adversely affected.

In addition, each party has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement, as well as the costs and expenses of filing, printing and mailing this proxy statement/prospectus and all filing and other fees paid to the SEC and other regulatory agencies in connection with the mergers. If the mergers are not completed, the parties would have to recognize these expenses without realizing the expected benefits of the mergers. Any of the foregoing, or other risks arising in connection with the failure of or delay in consummating the mergers, including the diversion of management attention from pursuing other opportunities and the constraints in the merger agreement on the ability to make significant changes to each party’s ongoing business during the pendency of the mergers, could have a material adverse effect on each party’s business, financial condition and results of operations.

Additionally, Evans’ or FSB’s business may have been adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the mergers, without realizing any of the anticipated benefits of completing the mergers, and the market price of Evans common stock might decline to the extent that the current market price reflects a market assumption that the mergers will be completed. If the merger agreement is terminated and a party’s board of directors seeks another merger or business combination, such party’s stockholders cannot be certain that such party will be able to find a party willing to engage in a transaction on more attractive terms than the merger.

Some of the conditions to the mergers may be waived by Evans or FSB without resoliciting FSB stockholder approval of the merger agreement.

Some of the conditions to the mergers set forth in the merger agreement may be waived by FSB or Evans, subject to the agreement of the other party in specific cases. See the section entitled “The Merger Agreement—Conditions to Consummation of the Mergers.” If any such conditions are waived, FSB and Evans will evaluate whether an amendment of this proxy statement/prospectus and resolicitation of proxies is warranted. In the event that the FSB board of directors determines that resolicitation of FSB stockholder is not warranted, Evans and FSB will have the discretion to complete the mergers without seeking further FSB stockholder approval.

Evans and FSB will be subject to business uncertainties and contractual restrictions while the mergers are pending.

Uncertainty about the effect of the mergers on employees, customers (including depositors and borrowers), suppliers and vendors may have an adverse effect on the business, financial condition and results of operations of each party. These uncertainties may impair Evans’ or FSB’s ability to attract, retain and motivate key personnel and customers (including depositors and borrowers) pending the consummation of the mergers, as such personnel and customers may experience uncertainty about their future roles and relationships following the consummation of the mergers. Additionally, these uncertainties could cause customers (including depositors and borrowers), suppliers, vendors and others who deal with Evans and/or FSB to seek to change existing business relationships with Evans and/or FSB or fail to extend an existing relationship with Evans and/or FSB. In addition, competitors may target each party’s existing customers by highlighting potential uncertainties and integration difficulties that may result from the mergers.

 

38


Table of Contents

The pursuit of the mergers and the preparation for the integration may place a burden on each company’s management and internal resources. Any significant diversion of management attention away from ongoing business concerns and any difficulties encountered in the transition and integration process could have a material adverse effect on each party’s business, financial condition and results of operations.

In addition, the merger agreement restricts each party from taking certain actions without the other party’s consent while the mergers are pending. These restrictions could have a material adverse effect on each party’s business, financial condition and results of operations. Please see the section entitled “The Merger Agreement—Covenants and Agreements—Conduct of Business Prior to the Effective Time” for a description of the restrictive covenants applicable to Evans and FSB.

FSB’s directors and executive officers have interests in the mergers that may be different from the interests of the FSB stockholders.

FSB’s directors and executive officers have interests in the mergers that may be different from, or in addition to, the interests of the FSB stockholders generally. The FSB board of directors was aware of these interests and considered them, among other matters, in approving the merger agreement and the transactions contemplated by the merger agreement and recommending the FSB stockholders that they vote to approve the merger proposal. These interests are described in more detail under the section entitled “The Mergers—Interests of FSB’s Directors and Executive Officers in the Mergers.”

The merger agreement contains provisions that may discourage other companies from pursuing, announcing or submitting a business combination proposal to FSB that might result in greater value to FSB stockholders.

The merger agreement contains provisions that may discourage a third party from pursuing, announcing or submitting a business combination proposal to FSB that might result in greater value to the FSB stockholders than the mergers. These provisions include a general prohibition on FSB from soliciting or entering into discussions with any third party regarding any acquisition proposal or offers for competing transactions, as described under the section entitled “The Merger Agreement—Agreement Not to Solicit Other Offers.” Furthermore, if the merger agreement is terminated, under certain circumstances, FSB may be required to pay Evans a termination fee equal to $1,400,000, as described under the section entitled “The Merger Agreement—Termination Fee.” FSB also has an unqualified obligation to submit its merger-related proposals to a vote by its stockholders, including if FSB receives an unsolicited proposal that the FSB board of directors has determined in good faith is superior to the mergers. See the section entitled “The Merger Agreement—FSB Special Meeting and Recommendation of the FSB Board of Directors.”

Each of the directors of FSB and certain executive officers of FSB, in their capacities as individuals, have separately entered into a FSB voting agreement pursuant to which they agreed to vote their beneficially owned shares of FSB common stock in favor of the merger proposal and certain related matters and against alternative transactions. As of the FSB record date, shares constituting approximately 9.47% of the FSB common stock entitled to vote at the FSB special meeting are subject to FSB voting agreements. For further information, please see the section entitled “The Merger Agreement—Voting Agreements.”

The shares of Evans common stock to be received by holders of FSB common stock who receive the stock consideration as a result of the mergers will have different rights from the shares of FSB common stock.

The rights of FSB stockholders are currently governed by the FSB charter, and the bylaws of FSB, as amended, which we refer to as the FSB bylaws. Upon completion of the mergers, the rights of former holders of FSB common stock will be governed by the Evans charter and the Evans bylaws. Evans is organized under New York law, while FSB is organized under Maryland law. The rights associated with FSB common stock are different from the rights associated with Evans common stock. Please see the section entitled “Comparison of Stockholders’ Rights” for a discussion of the different rights associated with Evans common stock.

 

39


Table of Contents

The merger and second merger, taken together, are expected to, but may not, qualify as a reorganization under Section 368(a) of the Code.

The parties expect the merger and the second merger, taken together, to be treated as a “reorganization” within the meaning of Section 368(a) of the Code, and the respective obligations of Evans and FSB to each complete the mergers is conditioned upon the receipt of U.S. federal income tax opinions to that effect from their respective tax counsel. These tax opinions represents the legal judgment of the counsel rendering the opinion and is not binding on the United States Internal Revenue Service, or the IRS, or the courts. These opinions will be based upon, among other things, certain representations and assumptions as to factual matters made by Evans and FSB. The failure of any factual representation or assumption to be true, correct and complete in all material respects could adversely affect the validity of the opinions. Furthermore, such expectation constitutes a forward-looking statement. For information on forward-looking statements, see the section entitled “Cautionary Statement Regarding Forward-Looking Statements.” If the merger and the second merger, taken together, does not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, then a U.S. holder (as defined below) of FSB common stock may be required to recognize any gain or loss equal to the difference between (1) the sum of the fair market value of Evans common stock received by the FSB stockholder in the mergers and the amount of cash, if any, received by the FSB stockholders in the mergers, and (2) the FSB stockholder’s adjusted tax basis in the shares of FSB common stock exchanged therefor. For further information, please refer to the section entitled “Material U.S. Federal Income Tax Consequences Relating to the Mergers.” You should consult your tax advisor to determine the particular tax consequences to you.

For further information, please refer to the section entitled “Material U.S. Federal Income Tax Consequences Relating to the Mergers.” You should consult your tax advisor to determine the particular tax consequences to you.

The opinion of Sandler O’Neill delivered to the FSB board of directors prior to the signing of the merger agreement will not reflect changes in circumstances after the date of the opinion.

Sandler O’Neill, FSB’s financial advisor in connection with the proposed mergers, orally delivered to the FSB board of directors its opinion, which was subsequently confirmed in writing, dated as of December 19, 2019, to the effect that, as of such date and based upon and subject to the factors, qualifications and assumptions set forth therein, the merger consideration set forth in the merger agreement was fair to the holders of FSB common stock from a financial point of view. Because FSB does not currently anticipate asking Sandler O’Neill to update its opinion, the opinion will not address the fairness of the merger consideration from a financial point of view at the time the mergers are completed. Accordingly, the opinion does not reflect changes that may occur or may have occurred after the date of the opinion, including changes to the operations and prospects of Evans or FSB, changes in general market and economic conditions or regulatory or other factors which may be beyond the control of Evans and FSB. Any such changes, or changes in other factors on which the opinion was based, may materially alter or affect the relative values of Evans or FSB. For a description of the other factors considered by the FSB board of directors in determining to approve the merger agreement and the transactions contemplated thereby, see the section entitled “The Mergers—FSB’s Reasons for the Mergers and Recommendation of the FSB Board of Directors.”

Litigation against FSB or Evans, or the members of the FSB or Evans board of directors, could prevent or delay the completion of the mergers.

While Evans and FSB believe that any claims that may be asserted by purported stockholder plaintiffs related to the mergers would be without merit, the results of any such potential legal proceedings are difficult to predict and could delay or prevent the mergers from being competed in a timely manner. The existence of litigation related to the mergers could affect the likelihood of obtaining the required approval from FSB stockholders. Moreover, any litigation could be time consuming and expensive, could divert Evans and FSB management’s attention away from their regular business and, any lawsuit adversely resolved against FSB, Evans or members of the FSB or Evans board of directors, could have a material adverse effect on each party’s business, financial condition and results of operations.

 

40


Table of Contents

One of the conditions to the consummation of the mergers is the absence of any law or order (whether temporary, preliminary or permanent) by any court or regulatory authority of competent jurisdiction prohibiting, restricting or making illegal consummation of the transactions contemplated by the merger agreement (including the mergers). Consequently, if a settlement or other resolution is not reached in any lawsuit that is filed or any regulatory proceeding and a claimant secures injunctive or other relief or a regulatory authority issues an order or other directive prohibiting, restricting or making illegal consummation of the transactions contemplated by the merger agreement (including the mergers), then such injunctive or other relief may prevent the mergers from becoming effective in a timely manner or at all.

Risks Relating to the Combined Company’s Business Following the Mergers

The market price of the common stock of the combined company after the mergers may be affected by factors different from those currently affecting the shares of Evans or FSB common stock.

Upon the completion of the mergers, Evans shareholders and FSB stockholders who receive the stock consideration will become shareholders of the combined company. Evans’ business differs from that of FSB, and, accordingly, the results of operations of the combined company and the market price of the combined company’s shares of common stock may be affected by factors different from those currently affecting the independent results of operations of each of Evans and FSB. For a further discussion of the businesses of Evans and FSB, please see the section entitled “Information About the Companies.” For a discussion of the businesses of FSB and Evans and of certain factors to consider in connection with such businesses, please see Annex D and Annex E hereto, with respect to FSB, and the documents incorporated by reference in this proxy statement/prospectus and referred to in the section entitled “Where You Can Find More Information,” with respect to Evans.

Sales of substantial amounts of Evans common stock in the open market by former FSB stockholders could depress Evans common stock price.

Shares of Evans common stock that are issued to FSB stockholders in the mergers will be freely tradable without restrictions or further registration under the Securities Act. Based on the number of shares of FSB common stock outstanding (which includes the shares of FSB common stock underlying FSB restricted stock awards and excludes the number of shares of FSB common stock issuable pursuant to outstanding FSB stock options) less the unallocated shares of FSB common stock held in the suspense account of the ESOP that will be delivered to FSB to repay the outstanding ESOP indebtedness and subsequently cancelled pursuant to the merger agreement, in each case, as of March 5, 2020, the last practicable date prior to the printing of the attached proxy statement/prospectus, and based on adjustment on a pro rata basis such that approximately 50% of the merger consideration will be the stock consideration, Evans currently expects to issue 422,417 shares of Evans common stock in connection with the mergers. If the mergers are completed and if FSB’s former stockholders who receive the stock consideration sell substantial amounts of Evans common stock in the public market following completion of the mergers, the market price of Evans common stock may decrease. These sales might also make it more difficult for Evans to sell equity or equity-related securities at a time and price that it otherwise would deem appropriate.

Combining the two companies may be more difficult, costly or time consuming than expected and the anticipated benefits and cost savings of the mergers may not be realized.

The success of the mergers will depend on, among other things, the combined company’s ability to combine the businesses of Evans and FSB. If the combined company is not able to successfully achieve this objective, the anticipated benefits of the mergers may not be realized fully, or at all, or may take longer to realize than expected.

Evans and FSB have operated and, until the completion of the mergers, will continue to operate, independently. The success of the mergers, including anticipated benefits and cost savings, will depend, in part, on the successful combination of the businesses of Evans and FSB. To realize these anticipated benefits and cost savings, after the completion of the mergers, Evans expects to integrate FSB’s business into its own. It is possible

 

41


Table of Contents

that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the combined company’s ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the mergers. The loss of key employees could have an adverse effect on the companies’ financial results and the value of their common stock. If Evans experiences difficulties with the integration process, the anticipated benefits of the mergers may not be realized fully, or at all, or may take longer to realize than expected. As with any merger of financial institutions, there also may be business disruptions that cause Evans or FSB to lose current customers or cause current customers to remove their accounts from Evans or FSB and move their business to competing financial institutions. Integration efforts between the two companies will also divert management attention and resources. These integration matters could have an adverse effect on each of Evans or FSB during this transition period and for an undetermined period after consummation of the mergers.

The combined company expects to incur substantial expenses related to the mergers.

The combined company expects to incur substantial expenses in connection with consummation of the mergers and combining the business, operations, networks, systems, technologies, policies and procedures of the two companies. Although Evans and FSB have assumed that a certain level of transaction and combination expenses would be incurred, there are a number of factors beyond their control that could affect the total amount or the timing of their combination expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. Due to these factors, the transaction and combination expenses associated with the mergers could, particularly in the near term, exceed the savings that the combined company expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the combination of the businesses following the consummation of the mergers. As a result of these expenses, both Evans and FSB expect to take charges against their earnings before and after the completion of the mergers. The charges taken in connection with the mergers are expected to be significant, although the aggregate amount and timing of such charges are uncertain at present.

Holders of Evans and FSB common stock will have a reduced ownership and voting interest after the mergers and will exercise less influence over management.

Holders of Evans and FSB common stock currently have the right to vote for the election of the directors and on other matters affecting Evans and FSB, respectively. Upon the completion of the mergers, each FSB stockholder who receives shares of Evans common stock will become a shareholder of Evans with a percentage ownership of Evans common stock that is smaller than such stockholder’s percentage ownership of FSB common stock. Following completion of the mergers, it is currently expected that former holders of FSB common stock as a group will own approximately 7.87% of the combined company’s common stock and existing Evans shareholders as a group will own approximately 92.13% of the combined company’s common stock. As a result, FSB stockholders who receive shares of Evans common stock will have less influence on the management and policies of the combined company than they now have on the management and policies of FSB, and existing Evans shareholders may have less influence than they now have on the management and policies of Evans.

The unaudited pro forma combined condensed financial information included in this proxy statement/prospectus is illustrative only and the actual financial condition and results of operations after the mergers may differ materially.

The unaudited pro forma combined condensed financial statements in this proxy statement/prospectus are presented for illustrative purposes only. The unaudited pro forma combined condensed financial statements are not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the mergers been completed as of the dates indicated or that may be achieved in the future. A final determination of the fair values of FSB’s assets and liabilities, which cannot be made prior to the completion of the mergers, will be based on the actual net tangible and intangible assets of FSB that exist as of the closing date. Consequently, fair value adjustments and amounts preliminarily allocated to goodwill and identifiable intangibles could change significantly

 

42


Table of Contents

from those allocations used in the unaudited pro forma combined condensed financial statements presented herein and could result in a material change in amortization of acquired intangible assets. In addition, the value of the final merger consideration will be, in part, based on the closing price of Evans common stock on the closing date. For more information, please see the section entitled “Unaudited Pro Forma Combined Condensed Financial Information.”

Risks Related to Evans’ Business

Evans is, and will continue to be, subject to the risks described in Evans’ Annual Report on Form 10-K for the year ended December 31, 2018, and any updates to those risk factors set forth in Evans’ Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings, all of which are or will be filed with the SEC and are incorporated by reference into this proxy statement/prospectus. See the sections entitled “Additional Information” and “Where You Can Find More Information.”

Risks Related to FSB’s Business

Due to the high concentration of one- to four-family residential mortgage loans in FSB Bank’s loan portfolio and the prolonged low interest rate environment, the average yield on FSB Bank’s loan portfolio is low.

Historically, the vast majority of FSB’s loan portfolio has consisted of longer-term (up to 30 years) fixed-rate one- to four-family residential mortgage loans. In recent years, FSB has sold newly originated fixed-rate one- to four-family residential mortgage loans with terms of 15 years or longer, but such loans will likely continue to comprise a large percentage of FSB’s interest-earning assets. At September 30, 2019, FSB’s one- to four-family residential mortgage loan portfolio totaled $215.4 million, or 77.3% of total loans. Traditionally one- to four-family residential mortgage loans have lower yields than commercial real estate or commercial and industrial loans because one- to four-family residential mortgage loans have less credit risk. During the prolonged low interest rate environment, the average yield on FSB’s one- to four-family residential mortgage loans has decreased. As a result, the average yield on FSB’s one- to four-family residential mortgage loan portfolio decreased 119 basis points to 4.08% for the nine months ended September 30, 2019 from 5.27% for the year ended December 31, 2011.

Income from secondary mortgage market operations is volatile, and FSB may incur losses with respect to its secondary mortgage market operations that could negatively affect its earnings.

A key component of FSB’s strategy is to continue to sell in the secondary market the longer term, conforming fixed-rate residential mortgage loans that it originates, earning other income in the form of gains on sale. For the nine months ended September 30, 2019, loan sales made up approximately 45.9% of FSB’s other income. When interest rates rise, the demand for mortgage loans tends to fall and may reduce the number of loans FSB can originate for sale. Weak or deteriorating economic conditions also tend to reduce loan demand. If the loan demand for conforming fixed-rate residential mortgage loans decreases or FSB is unable to sell such loans for an adequate profit, then FSB’s other income will likely decline which would adversely affect its earnings.

FSB’s business strategy includes growth, and FSB’s financial condition and results of operations could be negatively affected if it fails to grow or fails to manage its growth effectively.

FSB’s business strategy includes growth in assets, deposits and the scale of its operations. Achieving FSB’s growth targets will require it to attract customers who currently bank at other financial institutions in FSB’s market area. FSB’s ability to successfully grow will depend on a variety of factors, including its ability to attract and retain experienced employees, the continued availability of desirable business and consumer opportunities in its market area, the competitive responses from other financial institutions in its market area and its ability to manage its growth. Growth opportunities may not be available or FSB may not be able to manage its growth successfully. If FSB does not grow or does not manage its growth effectively, its financial condition and operating results could be negatively affected.

 

43


Table of Contents

Because FSB intends to increase its commercial and multi-family real estate, commercial and construction loan originations, FSB’s lending risk will increase and downturns in the real estate market or local economy could adversely affect its earnings.

Commercial real estate, multi-family and commercial loans generally have more risk than residential mortgage loans. Because the repayment of commercial real estate, multi-family and commercial loans depends on the successful management and operation of the borrower’s properties or related businesses, repayment of such loans can be affected by adverse conditions in the real estate market or the local economy. Commercial real estate, multi-family and commercial loans may also involve relatively large loan balances to individual borrowers or groups of related borrowers. A downturn in the real estate market or the local economy could adversely impact the value of properties securing the loan or the revenues from the borrower’s business thereby increasing the risk of non-performing loans. Also, many of FSB’s multi-family and commercial real estate and commercial business borrowers have more than one loan outstanding with FSB. Consequently, an adverse development with respect to one loan or one credit relationship can expose FSB to a significantly greater risk of loss compared to an adverse development with respect to a residential mortgage loan. Further, unlike residential mortgages or multi-family and commercial real estate loans, commercial and industrial loans may be secured by collateral other than real estate, such as inventory and accounts receivable, the value of which may be more difficult to appraise and may be more susceptible to fluctuation in value at default. As FSB commercial real estate, multi-family and commercial loan portfolios increase, the corresponding risks and potential for losses from these loans may also increase.

Construction loans involve risks attributable to the fact that loan funds are secured by a project under construction, and the project is of uncertain value prior to its completion. It can be difficult to accurately evaluate the total funds required to complete a project, and construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan. If FSB is forced to foreclose on a project prior to completion, FSB may be unable to recover the entire unpaid portion of the loan. In addition, FSB may be required to fund additional amounts to complete a project and may have to hold the property for an indeterminate period of time, any of which could adversely affect FSB’s business, financial condition and results of operations.

FSB’s cost of operations is high relative to its revenues.

FSB’s non-interest expense was $7.4 million for the nine months ended September 30, 2019. FSB continues to analyze its expenses and achieve efficiencies where available. Although FSB strives to generate increases in both net interest income and non-interest income, its efficiency ratio remains high as a result of operating expenses. FSB’s efficiency ratio totaled 100.6% and 98.6% for the nine months ended September 30, 2019 and 2018, respectively.

A worsening of economic conditions in FSB’s market area could reduce demand for its products and services and/or result in increases in its level of non-performing loans, which could adversely affect its operations, financial condition and earnings.

Unlike larger financial institutions that are more geographically diversified, FSB’s profitability depends primarily on the general economic conditions in Western New York and more specifically the New York communities in and surrounding Monroe, Livingston, Ontario, Orleans, Wayne, Jefferson and Erie Counties, New York. These counties have generally experienced limited or no population growth since 2010. Local economic conditions have a significant impact on the ability of FSB’s borrowers to repay loans and the value of the collateral securing loans. Almost all of FSB’s loans in its portfolio are to borrowers located in, or are secured by collateral located in, the New York communities in and surrounding Monroe County, New York.

 

44


Table of Contents

A deterioration in economic conditions could result in the following consequences, any of which could have a material adverse effect on FSB’s business, financial condition, liquidity and results of operations:

 

   

demand for FSB’s products and services may decline;

 

   

loan delinquencies, problem assets and foreclosures may increase;

 

   

collateral for loans, especially real estate, may decline in value, thereby reducing customers’ future borrowing power; and

 

   

the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to FSB.

Moreover, a significant decline in general economic conditions caused by inflation, recession, acts of terrorism, an outbreak of hostilities or other international or domestic calamities, unemployment or other factors beyond FSB’s control could further impact these local economic conditions and could further negatively affect the financial results of FSB’s banking operations. In addition, deflationary pressures, while possibly lowering FSB’s operating costs, could have a significant negative effect on FSB’s borrowers, especially its business borrowers, and the values of underlying collateral securing loans, which could negatively affect FSB’s financial performance.

If FSB’s allowance for loan losses is not sufficient to cover actual loan losses, FSB’s earnings and capital could decrease.

Lending is inherently risky and FSB is exposed to the risk that its borrowers may default on their obligations. A borrower’s default on its obligations may result in lost principal and interest income and increased operating expenses as a result of the allocation of management’s time and resources to the collection and work-out of the loan. In certain situations, where collection efforts are unsuccessful or acceptable work-out arrangements cannot be reached, FSB may have to charge-off the loan in whole or in part. In such situations, FSB may acquire real estate or other assets, if any, that secure the loan through foreclosure or other similar available remedies, and the amount owed under the defaulted loan may exceed the value of the assets acquired.

FSB makes various assumptions and judgments about the collectability of its loan portfolio, including the creditworthiness of FSB’s borrowers and the value of the real estate and other assets serving as collateral for many of its loans. In determining the amount of the allowance for loan losses, FSB reviews its loans and its loss and delinquency experience, and it evaluates other factors including, among other things, current economic conditions. If FSB’s assumptions are incorrect, or if delinquencies or non-performing loans increase, FSB’s allowance for loan losses may not be sufficient to cover losses inherent in its loan portfolio, which would require additions to FSB’s allowance, which could materially decrease FSB’s net income. FSB’s allowance for loan losses was $1.7 million, or 0.62% of total loans at September 30, 2019.

In addition, bank regulators periodically review FSB’s allowance for loan losses and, based on their judgments and information available to them at the time of their review, may require FSB to increase its allowance for loan losses or recognize further loan charge-offs. An increase in FSB’s allowance for loan losses or loan charge-offs as required by these regulatory authorities may reduce FSB’s net income and its capital, which may have a material adverse effect on FSB’s financial condition and results of operations.

Future changes in interest rates may reduce FSB’s profits.

FSB’s profitability, like that of most financial institutions, depends to a large extent upon its net interest income, which is the difference between FSB’s interest income on interest-earning assets, such as loans and securities, and its interest expense on interest-bearing liabilities, such as deposits and borrowed funds. Accordingly, FSB’s results of operations depend largely on movements in market interest rates and its ability to manage its interest-rate-sensitive assets and liabilities in response to these movements. Factors such as inflation, recession and instability in financial markets, among other factors beyond its control, may affect interest rates.

 

45


Table of Contents

If interest rates rise, and if rates on FSB’s deposits reprice upwards faster than the rates on its long-term loans and investments, FSB would experience compression of its interest rate spread, which would have a negative effect on FSB’s profitability. Furthermore, increases in interest rates may adversely affect the ability of FSB borrowers to make loan repayments on adjustable-rate loans, as the interest owed on such loans would increase as interest rates increase. Conversely, decreases in interest rates can result in increased prepayments of loans and mortgage-related securities, as borrowers refinance to reduce their borrowing costs. Under these circumstances, FSB is subject to reinvestment risk as it may have to redeploy such loan or securities proceeds into lower-yielding assets, which would also negatively impact FSB’s interest income.

Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on FSB’s financial condition, liquidity and results of operations. Changes in the level of interest rates also may negatively affect FSB’s ability to originate loans, the value of its assets and its ability to realize gains from the sale of its assets, all of which ultimately affect FSB’s earnings.

At September 30, 2019, FSB’s “rate shock” analysis indicates that its economic value of equity would decrease by $14.0 million, or 39.9%, if there was an instantaneous 200 basis point increase in market interest rates. However, FSB’s interest rate risk modeling techniques and assumptions likely may not fully predict or capture the impact of actual interest rate changes on its balance sheet or projected operating results.

If FSB’s nonperforming assets increase, FSB’s earnings will be adversely affected.

At September 30, 2019, FSB’s nonperforming assets, which consist solely of non-performing loans, totaled $1.0 million, or 0.3% of total assets. FSB’s nonperforming assets adversely affect its net income in various ways:

 

   

FSB records interest income only on the cash basis or cost-recovery method for non-accrual loans and its does not record interest income for other real estate owned;

 

   

FSB must provide for probable loan losses through a current period charge to the provision for loan losses;

 

   

non-interest expense increases when FSB writes down the value of properties in its other real estate owned portfolio to reflect changing market values;

 

   

there are legal fees associated with the resolution of problem assets, as well as carrying costs, such as taxes, insurance, and maintenance fees; and

 

   

the resolution of nonperforming assets requires the active involvement of management, which can distract them from more profitable activity.

If additional borrowers become delinquent and do not pay their loans and FSB is unable to successfully manage its nonperforming assets, FSB’s losses and troubled assets could increase significantly, which could have a material adverse effect on FSB’s financial condition and results of operations.

FSB’s small size makes it more difficult for FSB to compete.

FSB’s small asset size makes it more difficult to compete with other financial institutions which are generally larger and can more easily afford to invest in the marketing and technologies needed to attract and retain customers. Because FSB’s principal source of income is the net interest income it earns on its loans and investments after deducting interest paid on deposits and other sources of funds, FSB’s ability to generate the revenues needed to cover its expenses and finance such investments is limited by the size of its loan and investment portfolios. Accordingly, FSB is not always able to offer new products and services as quickly as its competitors. FSB’s ability to originate larger loans is limited by its lower loans to one borrower limit, which reduces its ability to compete for certain types of loans, in particular higher yielding commercial loans, and can reduce FSB’s interest income. FSB’s lower earnings also make it more difficult to offer competitive salaries and

 

46


Table of Contents

benefits. In addition, FSB’s smaller customer base makes it difficult to generate meaningful non-interest income. Finally, as a smaller institution, FSB is disproportionately affected by the ongoing increased costs of compliance with banking and other regulations.

Strong competition within FSB’s market area may limit its growth and profitability.

Competition in the banking and financial services industry is intense. In FSB’s market area, FSB competes with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Some of FSB’s competitors have greater name recognition and market presence that benefit them in attracting business, and offer certain services that FSB does not or cannot provide. In addition, larger competitors may be able to price loans and deposits more aggressively than FSB does, which could affect its ability to grow and remain profitable on a long-term basis. FSB’s profitability depends upon its continued ability to successfully compete in its market area. If FSB must raise interest rates paid on deposits or lower interest rates charged on its loans, FSB’s net interest margin and profitability could be adversely affected.

Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of FSB’s competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services than FSB can as well as better pricing for those products and services.

Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect FSB’s operations and/or increase FSB’s costs of operations.

FSB is subject to extensive regulation, supervision and examination by the NYDFS, the Federal Deposit Insurance Corporation, which we refer to as FDIC, and the Federal Reserve Board. Such regulation and supervision govern the activities in which an institution and its holding company may engage and are intended primarily for the protection of federal deposit insurance funds and the depositors and borrowers of FSB Bank, rather than for FSB stockholders. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on FSB’s operations, the classification of FSB’s assets and determination of the level of FSB’s allowance for loan losses. These regulations, along with existing tax, accounting, securities, insurance and monetary laws, rules, standards, policies, and interpretations control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on FSB’s operations. Further, changes in accounting standards can be both difficult to predict and involve judgment and discretion in their interpretation by FSB and its independent accounting firms. These changes could materially impact, potentially even retroactively, how FSB reports its financial condition and results of operations.

Non-compliance with the USA PATRIOT Act of 2001, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.

The USA PATRIOT Act of 2001 and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions, including restrictions on conducting acquisitions or establishing new branches. The policies and procedures FSB has adopted that are designed to assist in compliance with these laws and regulations may not be effective in preventing violations of these laws and regulations.

 

47


Table of Contents

FSB faces significant operational risks because the nature of the financial services business involves a high volume of transactions.

FSB operates in diverse markets and relies on the ability of its employees and systems to process a high number of transactions. Operational risk is the risk of loss resulting from FSB’s operations, including but not limited to, the risk of fraud by employees or persons outside FSB, the execution of unauthorized transactions by employees, errors relating to transaction processing and technology, breaches of FSB’s internal control systems and compliance requirements, and business continuation and disaster recovery. Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits. This risk of loss also includes the potential legal actions that could arise as a result of operational deficiencies or as a result of non-compliance with applicable regulatory standards, adverse business decisions or their implementation, or customer attrition due to potential negative publicity. In the event of a breakdown in FSB’s internal control systems, improper operation of systems or improper employee actions, FSB could suffer financial loss, face regulatory action, and/or suffer damage to FSB’s reputation.

Cyber-attacks or other security breaches could adversely affect FSB’s operations, net income or reputation.

FSB regularly collects, processes, transmits and stores significant amounts of confidential information regarding its customers, employees and others and concerning FSB’s business, operations, plans and strategies. In some cases, this confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on FSB’s behalf.

Information security risks have generally increased in recent years because of the proliferation of new technologies, the use of the Internet and telecommunications technologies to conduct financial and other transactions and the increased sophistication and activities of perpetrators of cyber-attacks and mobile phishing. Mobile phishing, a means thieves use to obtain sensitive personal information through fraudulent e-mail, text or voice mail, is an emerging threat targeting the customers of popular financial entities. A failure in or breach of FSB’s operational or information security systems, or those of FSB’s third-party service providers, as a result of cyber-attacks or information security breaches or due to employee error, malfeasance or other disruptions, could adversely affect FSB’s business, result in the disclosure or misuse of confidential or proprietary information, damage FSB’s reputation, increase FSB’s costs or cause losses.

If this confidential or proprietary information were to be mishandled, misused or lost, FSB could be exposed to significant regulatory consequences, reputational damage, civil litigation and financial loss.

Physical, procedural and technological safeguards designed to protect confidential and proprietary information from mishandling, misuse or loss, do not provide absolute assurance that mishandling, misuse or loss of information will not occur, and if mishandling, misuse or loss of information does occur, that those events will be promptly detected and addressed. Similarly, when confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on FSB’s behalf, FSB’s policies and procedures require that the third party agree to maintain the confidentiality of the information, establish and maintain policies and procedures designed to preserve the confidentiality of the information, and permit FSB to confirm the third party’s compliance with the terms of the agreement. As information security risks and cyber threats continue to evolve, FSB may be required to expend additional resources to continue to enhance its information security measures and/or to investigate and remediate any information security vulnerabilities.

Risks associated with system failures, interruptions, or breaches of security could negatively affect FSB’s earnings.

Information technology systems are critical to FSB’s business. FSB uses various technology systems to manage its customer relationships, general ledger, securities, deposits, and loans. However, FSB’s policies and procedures are designed to prevent or limit the impact of system failures, interruptions, and security breaches but

 

48


Table of Contents

may not be adequate. In addition, any compromise of FSB’s systems could deter customers from using FSB’s products and services. Although FSB relies on security systems to provide the security and authentication necessary to effect the secure transmission of data, these precautions may not protect FSB’s systems from compromises or breaches of security.

In addition, FSB outsources a majority of its data processing to third-party providers. If these third-party providers encounter difficulties, or if FSB has difficulty communicating with them, FSB’s ability to adequately process and account for transactions could be affected, and FSB’s business operations could be adversely affected. Threats to information security also exist in the processing of customer information through various other vendors and their personnel.

The occurrence of any system failures, interruptions, or breaches of security could damage FSB’s reputation and result in a loss of customers and business, subject FSB to additional regulatory scrutiny or expose FSB to litigation and possible financial liability. Any of these events could have a material adverse effect on FSB’s financial condition and results of operations.

FSB depends on its management team to implement its business strategy and execute successful operations and FSB could be harmed by the loss of their services.

FSB depends upon the services of the members of FSB’s senior management team to implement FSB’s business strategy and execute its operations. Members of FSB’s senior management team and lending personnel who have expertise and key business relationships in FSB’s markets could be difficult to replace. The loss of these persons or FSB’s inability to hire additional qualified personnel, could impact FSB’s ability to implement its business strategy and could have a material adverse effect on FSB’s results of operations and its ability to compete.

FSB Bank is a community bank and its ability to maintain its reputation is critical to the success of FSB’s business, and the failure to do so may materially adversely affect FSB’s performance.

FSB Bank is a community bank and FSB Bank’s reputation is one of FSB’s most valuable assets. A key component of FSB’s business strategy is to take advantage of FSB Bank’s reputation for customer service and knowledge of local markets to expand FSB Bank’s presence by pursuing new business opportunities with existing and prospective customers in FSB Bank’s market area and contiguous areas. This is done, in part, by recruiting, hiring and retaining employees who share FSB’s core values of being an integral part of the communities FSB serves, delivering superior service to FSB’s customers and caring about FSB’s customers. If FSB’s reputation is negatively affected by the actions of its employees, or by its inability to conduct its operations in a manner that is appealing to current or prospective customers, FSB’s business and operating results may be materially adversely affected.

FSB is subject to environmental liability risk associated with lending activities.

A significant portion of FSB’s loan portfolio is secured by real estate, and FSB could become subject to environmental liabilities with respect to one or more of these properties. During the ordinary course of business, FSB may foreclose on and take title to properties securing defaulted loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous conditions or toxic substances are found on these properties, FSB may be liable for remediation costs, as well as for personal injury and property damage, civil fines and criminal penalties, regardless of when the hazardous conditions or toxic substances first affected any particular property. Environmental laws may require FSB to incur substantial expenses to address unknown liabilities and may materially reduce the affected property’s value or limit FSB’s ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase FSB’s exposure to environmental liability. FSB’s loan foreclosure policy, which requires it to perform an environmental review before initiating any foreclosure action on non-residential real property, may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on FSB.

 

49


Table of Contents

THE FSB SPECIAL MEETING

This section contains information for FSB stockholders about the FSB special meeting. On or about [ ], 2020, this proxy statement/prospectus was mailed to holders of FSB common stock entitled to vote at the FSB special meeting. This proxy statement/prospectus is accompanied by a notice of the FSB special meeting and a form of proxy card that the FSB board of directors is soliciting for use at the FSB special meeting and at any adjournments or postponements thereof.

Date, Time and Place of the FSB Special Meeting

The FSB special meeting will be held at the Perinton Community Center located at 1350 Turk Hill Road, Fairport, New York 14450 on April 20, 2020 at 2:00 p.m., local time

Purpose of the FSB Special Meeting

At the FSB special meeting, FSB stockholders as of the FSB record date will be asked to consider and vote on the following proposals:

 

   

the merger proposal; and

 

   

the adjournment proposal.

Recommendation of the FSB Board of Directors

The FSB board of directors has unanimously approved and adopted the merger agreement and the transactions contemplated thereby and recommends that you vote “FOR” the merger proposal and “FOR” the adjournment proposal.

Record Date, Outstanding Shares, Shares Entitled to Vote and Quorum

The FSB board of directors has fixed the close of business on March 5, 2020 as the FSB record date for determining the holders of FSB common stock entitled to receive notice of and to vote at the FSB special meeting.

As of the FSB record date, there were 1,940,661 shares of FSB common stock outstanding and entitled to vote at the FSB special meeting, held by 164 holders of record. Each FSB stockholder of record on that date is entitled to one vote for each share held on each proposal to be considered at the FSB special meeting.

The presence (in person or by proxy) of holders of a majority of the shares of FSB common stock outstanding and entitled to vote at the FSB special meeting constitutes a quorum for transacting business at the FSB special meeting. All shares of FSB common stock present in person or represented by proxy, including abstentions and broker non-votes, will be treated as present and entitled to vote for purposes of determining the presence or absence of a quorum for all matters voted on at the FSB special meeting.

Vote Required, Treatment of Abstentions and Failure to Vote

Merger proposal:

 

   

Standard: Approval of the merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of FSB common stock entitled to vote on the merger proposal.

 

   

Effect of abstentions and broker non-votes: If you fail to vote, mark “ABSTAIN” on your proxy or fail to either submit a proxy or vote at the FSB special meeting, or are a “street name” holder and fail to instruct your broker, bank, or other nominee how to vote with respect to the merger proposal, it will have the same effect as a vote “AGAINST” the merger proposal.

 

50


Table of Contents

Adjournment proposal:

 

   

Standard: Assuming a quorum is present, approval of the adjournment proposal, if necessary or required, requires the affirmative vote of the holders of a majority of the votes present in person or by proxy at the FSB special meeting and entitled to vote thereon. If a quorum is not present, the adjournment proposal may nevertheless be approved by the affirmative vote of the holders of a majority in voting power of the FSB common stock held by the FSB stockholders present in person or by proxy at the FSB special meeting and entitled to vote thereon.

 

   

Effect of abstentions and broker non-votes: If you fail to vote, mark “ABSTAIN” on your proxy or fail to either submit a proxy or vote at the FSB special meeting, or are a “street name” holder and fail to instruct your broker, bank or other nominee how to vote with respect to the adjournment proposal, it will have no effect on the adjournment proposal.

FSB stockholders must approve the merger proposal in order for the mergers to occur. FSB stockholders are not, however, required to approve the adjournment proposal in order for the mergers to occur. If FSB stockholders fail to approve the adjournment proposal, but approve the merger proposal, the mergers may nonetheless occur.

Shares Held by FSB’s Executive Officers and Directors

As of the FSB record date, the directors and executive officers of FSB and their affiliates collectively owned, and were entitled to vote, 132,686 shares of FSB common stock, representing approximately 6.84% of the shares of FSB common stock outstanding on that date. Each of the directors and executive officers of FSB, solely in their individual capacity as a FSB stockholder, have entered into a separate voting agreement with Evans and FSB, pursuant to which each such FSB director or executive officer has agreed to vote in favor of the merger proposal.

When considering the recommendation of the FSB board of directors that you vote in favor of the merger proposal, FSB stockholders should be aware that certain of the directors and executive officers of FSB have certain interests in the merger that may be different from, or in addition to, the interests of FSB stockholders generally. The FSB board of directors was aware of these interests and considered them, among other matters, in making its recommendation that FSB stockholders vote to approve the merger proposal. For more information, see the section entitled “The Mergers—Interests of FSB’s Directors and Executive Officers in the Mergers.”

Voting of Proxies and Incomplete Proxies

A FSB stockholder may vote by proxy or in person at the FSB special meeting. If you hold your shares of FSB common stock in your name as a FSB stockholder of record, you may authorize the persons named in the enclosed proxy card to vote your shares of FSB common stock at the FSB special meeting in the manner you direct by using one of the following methods:

 

   

By telephone: by calling toll free 1-800-652-8683 (which can also be found on your proxy card) and following the recorded instructions. Please have your proxy card or voting instruction form and your social security number or tax identification number available when you call. Voting by telephone is available 24 hours a day, 7 days a week until 1:00 a.m. Eastern Time on April 20, 2020, the day of the FSB special meeting.

 

   

Through the Internet: by accessing the website www.investorvote.com/FSBM (which can also be found on your proxy card) and following the instructions on the website. Please have your proxy card or voting instruction form and your social security number or tax identification number available when you access this voting site. Voting through the Internet is available 24 hours a day, 7 days a week until 1:00 a.m. Eastern Time on April 20, 2020, the day of the FSB special meeting.

 

   

By mail: by completing, signing and dating the enclosed proxy card and returning it to FSB using the enclosed envelope, which requires no additional postage if mailed in the United States.

 

51


Table of Contents

The FSB board of directors requests that you vote by completing, signing, dating and returning the enclosed proxy card to FSB in the enclosed postage-paid envelope or by submitting a proxy through the Internet or by telephone as described on the enclosed instructions as soon as possible. If you intend to submit your proxy through the Internet or by telephone, you must do so by 1:00 a.m. Eastern Time on April 20, 2020, the day of the FSB special meeting. If you intend to submit your proxy by mail, your completed proxy card must be received prior to the FSB special meeting.

All properly signed proxies received prior to the FSB special meeting and not revoked before the vote at the FSB special meeting will be voted at the FSB special meeting according to the instructions indicated on the proxies or, if no instructions are given, the shares of FSB common stock will be voted “FOR” the merger proposal, and “FOR” the adjournment proposal; however, for those shares of FSB common stock held in the ESOP and the FSB Savings Plan, if no instructions are given, such shares of FSB common stock will be voted in the same proportion as votes received from other participants in the ESOP or the FSB Savings Plan, respectively.

Your vote is very important. Whether or not you plan to attend the FSB special meeting, please take the time to vote by completing, signing, dating and returning the enclosed proxy card to FSB in the enclosed postage-paid envelope or by submitting a proxy through the Internet or by telephone as described on the enclosed instructions as soon as possible to make sure your shares of FSB common stock are represented at the FSB special meeting. Submitting a proxy now will NOT prevent you from being able to attend and vote in person at the FSB special meeting. Please vote, using one of the available methods described above, as soon as possible.

If you hold shares of FSB common stock in “street name” through a broker, bank or other nominee, you should check the voting form provided to you by such broker, bank or other nominee to determine whether you may vote through the Internet or by telephone.

Shares Held in Street Name and Broker Non-Votes

If your shares of FSB common stock are held in “street name” through a broker, bank or other nominee, meaning in the name of a broker, bank or other nominee who is the record holder, you must provide such record holder of your shares of FSB common stock with instructions on how to vote your shares of FSB common stock. Please follow the voting instructions provided by the broker, bank or other nominee. You may not vote your shares of FSB common stock held in street name by returning a proxy card directly to FSB or by voting in person at the FSB special meeting, unless you provide a “legal proxy,” which you must obtain from your broker, bank or other nominee. Further, brokers, banks or other nominees who hold shares of FSB common stock on behalf of their customers may not give a proxy to FSB to vote those shares of FSB common stock with respect to any of the proposals without specific instructions from their customers, as brokers, banks and other nominees do not have discretionary voting power on these matters. Therefore, failure to instruct your broker, bank or other nominee how to vote will have the same effect as a vote “AGAINST” approval of the merger proposal.

How to Revoke Your Proxy

If you are a holder of record of FSB common stock and have previously submitted your proxy, you may revoke your proxy at any time by taking any of the following actions before your proxy is voted at the FSB special meeting:

 

   

delivering a written notice bearing a date later than the date of your proxy card to the corporate secretary of FSB, stating that you revoke your proxy, which notice must be received by FSB prior to the beginning of the FSB special meeting;

 

   

completing, signing, dating and returning to the corporate secretary of FSB a new proxy card relating to the same shares of FSB common stock and bearing a later date, which new proxy card must be received by FSB prior to the beginning of the FSB special meeting;

 

52


Table of Contents
   

casting a new vote through the Internet or by telephone at any time before the closure of the Internet and telephone voting facilities at 1:00 a.m. Eastern Time on April 20, 2020, the day of the FSB special meeting; or

 

   

attending the FSB special meeting and voting in person, although attendance at the FSB special meeting will not, by itself, revoke a proxy.

You should send any written notice of revocation or duly executed new proxy card, as the case may be, to FSB at the following address:

FSB Bancorp, Inc.

45 South Main Street

Fairport, New York 14450

Telephone:(585) 223-9080

Attn: Roberta Ryan, Corporate Secretary

If you hold your shares of FSB common stock in “street name” through a broker, bank or other nominee, you must contact your record holder to change your vote.

Voting in Person

If you are a FSB stockholder of record on March 5, 2020, the FSB record date, you may attend the FSB special meeting and vote in person. Please note, however, that if your shares of FSB common stock are held of record by a broker, bank or other nominee and you wish to vote at the FSB special meeting, you must obtain a “legal proxy,” executed in your favor from such broker, bank or other nominee who is the holder of record of your shares of FSB common stock in order to vote your shares of FSB common stock in person at the FSB special meeting.

If you plan to attend the FSB special meeting, you must hold your shares of FSB common stock in your own name or have a letter from the record holder of your shares of FSB common stock confirming your ownership. In addition, you must bring a form of personal photo identification with you in order to be admitted to the meeting. FSB reserves the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification. Whether or not you intend to be present at the FSB special meeting, you are urged to complete, sign, date and return the enclosed proxy card to FSB in the enclosed postage-paid envelope or submit a proxy through the Internet or by telephone as described on the enclosed instructions as soon as possible. This will not prevent you from voting in person at the FSB special meeting, but will assure that your vote is counted if you are unable to attend. If you are then present at the FSB special meeting and wish to vote your shares of FSB common stock in person, your original proxy may be revoked by voting at the FSB special meeting.

Participants in the ESOP and the FSB Savings Plan

Participants in the ESOP will each receive a voting instruction form that reflects all of the shares that the participant may direct the trustee to vote on his or her behalf under the ESOP. Under the terms of the ESOP, the ESOP trustee votes all shares held by the ESOP, but each ESOP participant may direct the trustee how to vote the shares of FSB common stock allocated to his or her account. The ESOP trustee will vote all unallocated shares of FSB common stock held by the ESOP and allocated shares for which no voting instructions are received in the same proportion as shares for which it has received timely voting instructions.

In addition, participants in the FSB Savings Plan with an interest in the FSB Stock Fund will receive a voting instruction form that allows them to direct the FSB Savings Plan trustee to vote their interest in the FSB Stock Fund. If a participant does not direct the FSB Savings Plan trustee how to vote his or her interests in the FSB Stock Fund, the trustee will vote such interest in the same proportion as interests for which it has received timely voting instructions from other FSB Savings Plan participants. The deadline for returning a voting instruction form to each plan’s trustee is April 13, 2020.

 

53


Table of Contents

Proxy Solicitation

The enclosed proxy is solicited by and on behalf of the FSB board of directors. FSB will pay the expenses of soliciting proxies to be voted at the FSB special meeting, except that FSB and Evans have each agreed to share equally the costs of printing of this proxy statement/prospectus. Following the original mailing of the proxies and other soliciting materials, FSB and its officers and employees may also solicit proxies by mail, telephone, facsimile, electronic mail or in person. No additional compensation will be paid to directors, officers or other employees of FSB for making these solicitations.

FSB has retained a proxy solicitation firm, EQ Proxy Services, to aid it in the solicitation process. FSB estimates it will pay EQ Proxy Services a fee of approximately $6,000.00 plus certain expenses and has agreed to indemnify EQ Proxy Services against certain losses. FSB intends to reimburse persons who hold FSB common stock of record but not beneficially, such as brokers, custodians, nominees and fiduciaries, for their reasonable expenses in forwarding copies of proxies and other soliciting materials to, and requesting authority for the exercise of proxies from, the persons for whom they hold the shares of FSB common stock.

Assistance

If you need assistance in completing your proxy card, have questions regarding the FSB special meeting or would like additional copies of this proxy statement/prospectus, please contact Kevin Maroney at (585) 223-9080 or FSB’s proxy solicitor, EQ Proxy Services, at (516) 220-8356, for banks and brokers, and all others can call, toll-free, (833) 503-4127.

 

54


Table of Contents

THE FSB PROPOSALS

PROPOSAL NO. 1: THE MERGER PROPOSAL

As discussed elsewhere in this proxy statement/prospectus, the holders of FSB common stock will consider and vote on the merger proposal. The holders of FSB common stock should read this proxy statement/prospectus carefully and in its entirety, including the annexes, for more detailed information concerning the merger agreement and the merger. A copy of the merger agreement is attached to this proxy statement/prospectus as Annex A.

Required Vote

 

   

Standard: Approval of the merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of FSB common stock entitled to vote on the merger proposal.

 

   

Effect of abstentions and broker non-votes: If you fail to vote, mark “ABSTAIN” on your proxy or fail to either submit a proxy or vote at the FSB special meeting, or are a “street name” holder and fail to instruct your broker, bank, or other nominee how to vote with respect to the merger proposal, it will have the same effect as a vote “AGAINST” the merger proposal.

Vote Recommendation

The FSB board of directors unanimously recommends a vote “FOR” the merger proposal. The mergers cannot be completed unless FSB stockholders approve the merger proposal. For a more detailed discussion of the FSB board of directors’ recommendation, see the section entitled “The Merger Agreement—FSB Special Meeting and Recommendation of the FSB Board of Directors.”

PROPOSAL NO. 2: THE ADJOURNMENT PROPOSAL

The FSB special meeting may be adjourned to another time or place, if necessary or appropriate, to permit, among other things, further solicitation of proxies if necessary to obtain additional votes in favor of the merger proposal.

If, at the FSB special meeting, the number of shares of FSB common stock present or represented and voting in favor of the merger proposal is insufficient to approve such merger proposal, FSB may move to adjourn the FSB special meeting in order to enable the FSB board of directors to solicit additional proxies in favor of the merger proposal. In this proposal, FSB is asking its stockholders to authorize the holder of any proxy solicited by the FSB board of directors on a discretionary basis to vote in favor of adjourning the FSB special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from FSB stockholders who have previously voted. FSB does not intend to call a vote on adjournment of the FSB special meeting to solicit additional proxies if the merger proposal is approved at the FSB special meeting. Pursuant to the merger agreement, FSB is required to adjourn or postpone the FSB special meeting to solicit additional proxies if it has not received proxies representing a sufficient number of votes for the FSB stockholder approvals needed to complete the mergers.

Required Vote

 

   

Standard: Assuming a quorum is present, approval of the adjournment proposal, if necessary or required, requires the affirmative vote of the holders of a majority of the votes present in person or by proxy at the FSB special meeting and entitled to vote thereon. If a quorum is not present, the adjournment proposal may nevertheless be approved by the affirmative vote of the holders of a majority in voting power of the FSB common stock held by the FSB stockholders present in person or by proxy at the FSB special meeting and entitled to vote thereon.

 

55


Table of Contents
   

Effect of abstentions and broker non-votes: If you fail to vote, mark “ABSTAIN” on your proxy or fail to either submit a proxy or vote at the FSB special meeting, or are a “street name” holder and fail to instruct your broker, bank or other nominee how to vote with respect to the adjournment proposal, it will have no effect on the adjournment proposal.

Vote Recommendation

The FSB board of directors unanimously recommends a vote “FOR” the adjournment proposal.

 

56


Table of Contents

INFORMATION ABOUT THE COMPANIES

Evans Bancorp, Inc.

One Grimsby Drive

Hamburg, New York 14075

Telephone: (716) 925-2000

Evans is financial holding company and the parent company of Evans Bank, a commercial bank with $1.5 billion in assets and $1.3 billion in deposits at September 30, 2019. Evans Bank is a full-service community bank, with 15 financial centers providing comprehensive financial services to consumer, business and municipal customers throughout Western New York. Evans’ wholly owned insurance subsidiary, The Evans Agency, LLC, provides life insurance, employee benefits and property and casualty insurance through ten insurance offices in the Western New York region. Evans Investment Services provides non-deposit investment products, such as annuities and mutual funds. Evans common stock is traded on the NYSE, under the symbol “EVBN.”

Additional information about Evans and its subsidiaries is included in documents incorporated by reference in this proxy statement/prospectus. See the section entitled “Where You Can Find More Information.”

FSB Bancorp, Inc.

45 South Main Street

Fairport, New York 14450

Telephone:(585) 223-9080

FSB is a bank holding company that has elected “financial holding company” status, and the parent company of Fairport Savings Bank, a New York stock savings bank with $324.8 million in consolidated assets and $232.9 million in deposits at September 30, 2019.

FSB Bank was established in 1888 and is headquartered in Fairport, New York. FSB Bank conducts business from its main office in Fairport and through four branch offices located in Penfield, Irondequoit, Webster and Perinton, New York, all of which are located in the greater Rochester metropolitan area. FSB Bank also operates loan origination offices in Pittsford and Greece, New York, in the Rochester metropolitan area, as well as in Buffalo and Watertown, New York.

FSB Bank’s principal business consists of originating one- to four-family residential real estate mortgage loans and home equity lines of credit, and to a lesser but increasing extent, commercial real estate, multi-family and construction loans. FSB Bank also offers commercial and industrial loans and other consumer loans. FSB Bank’s principal source of funds are the retail deposit products it offers to the general public in the areas surrounding its branch offices. FSB Bank also utilizes borrowings as a source of funds. FSB Bank’s revenues are derived primarily from interest on loans and, to a lesser extent, interest on investment and municipal securities and mortgage-backed securities. FSB Bank also generates revenues from other income, including realized gains on sales of loans associated with loan production generated from its loan origination offices, deposit fees and service charges, realized gains on sales of securities, earnings on bank owned life insurance and loan fees. Additionally, FSB Bank derives a portion of its other income through Fairport Wealth Management, its subsidiary that offers non-deposit investments such as annuities, insurance products and mutual funds, as well as asset management. FSB common stock is traded on the Nasdaq, under the symbol “FSBC.”

 

57


Table of Contents

THE MERGERS

The following discussion contains material information regarding the mergers. The discussion is subject to, and qualified in its entirety by reference to, the merger agreement, which is attached to this proxy statement/prospectus as Annex A and is incorporated by reference herein. The following is not intended to provide factual information about the parties or any of their respective subsidiaries or affiliates. This discussion does not purport to be complete and may not contain all of the information about the mergers that is important to you. We urge you to read carefully this entire proxy statement/prospectus, including the merger agreement, for a more complete understanding of the mergers.

Terms of the Mergers

Each of the Evans board of directors and the FSB board of directors approved and adopted the merger agreement. The merger agreement provides that, among other things, (i) Merger Sub will merge with and into FSB, with FSB continuing as the surviving corporation in the merger, (ii) immediately thereafter, FSB will merge with and into Evans, with Evans continuing as the surviving corporation in the second merger, and (iii) immediately thereafter, FSB Bank will merge with and into Evans Bank, with Evans Bank continuing as the surviving bank in the bank merger.

At the effective time, each share of FSB common stock issued and outstanding immediately prior to the effective time, except certain specified shares, will be converted, at the election of the FSB stockholder, into the right to receive, either (i) $17.80 in cash or (ii) 0.4394 shares of Evans common stock.

Each holder of FSB common stock is entitled to elect the form of the merger consideration that he or she would like to receive for his or her shares of FSB common stock. All such elections are subject to adjustment on a pro rata basis so that ultimately approximately 50% of the shares of FSB common stock will be treated as cash election shares and approximately 50% of the shares of FSB common stock will be treated as stock election shares.

Evans will not issue any fractional shares of Evans common stock in the merger. Instead, a FSB stockholder who would otherwise be entitled to receive a fraction of a share of Evans common stock will receive, in lieu thereof, an amount in cash, rounded up to the nearest cent (without interest), determined by multiplying (i) the fraction of a share (rounded to the nearest thousandth when expressed as a decimal form) of Evans common stock that such FSB stockholder would otherwise be entitled to receive by (ii) the average closing price.

FSB stockholders are being asked to approve the merger agreement. See the section entitled “The Merger Agreement” for additional and more detailed information regarding the legal documents that govern the mergers, including information about the conditions to consummation of the mergers and the provisions for terminating or amending the merger agreement.

Background of the Mergers

Since its conversion from the mutual holding company form of organization to a stock holding company and raising $10.3 million of gross proceeds in July 2016, FSB has managed its capital through stock repurchases and controlled organic growth, primarily in its residential mortgage and commercial loan portfolios. In addition to implementing its business plan, the FSB board of directors has considered various strategic alternatives to enhance stockholder value, including potential acquisitions of financial services companies or other financial institutions and strategic partnerships. Pursuant to federal banking regulations, FSB was generally prohibited from entering into a sale of control transaction for three years following its conversion to stock form. That prohibition ended in July 2019.

 

58


Table of Contents

As FSB entered 2019, management began discussions with the FSB board of directors regarding the challenges it faced in improving FSB’s profitability and maintaining FSB Bank’s loan and deposit growth, which included the increasingly competitive landscape for loans and deposits in Upstate New York, higher costs of regulatory compliance, the historically low interest rate environment and flattening yield curve which has narrowed FSB Bank’s net interest margin and interest rate spread, and the need to grow in order to increase scale and better manage expenses. As part of these discussions, management emphasized the need to consider strategic opportunities that could further enhance stockholder value and provide improved delivery channels and product offerings to customers, including seeking a larger financial institution as a strategic partner.

In March 2019, the FSB board of directors held a strategic planning meeting. The FSB board of directors invited a representative of Sandler O’Neill, an investment banking firm that specializes in representing financial institutions, to update the FSB board of directors on the banking industry and the merger and acquisitions market. Sandler O’Neill also acted as FSB’s financial advisor in connection with its conversion to a stock holding company in 2016. In addition, a representative of FSB’s legal counsel, Luse Gorman, attended the meeting.

The representative of Luse Gorman began the meeting by giving a presentation and discussing the FSB board of directors’ fiduciary duties, specifically in the context of a change-in-control transaction. The representative of Sandler O’Neill then discussed FSB’s business, market and stock performance, both historically and in comparison to peer institutions. Sandler O’Neill provided the FSB board of directors with a range of potential valuations for FSB on a stand-alone basis, using various valuation methodologies, as well as a range of potential valuations on a change-in-control basis, using data from recent bank holding company merger transactions. The FSB board of directors then discussed the merits of different opportunities available to FSB, including continued organic growth or combining with a larger financial institution. Management and the FSB board of directors also discussed current issues related to banking generally and FSB particularly, including the challenge of hiring seasoned mortgage originators. As a result of the meeting, the FSB board of directors agreed to continue discussions regarding strategic alternatives while continuing to develop strategies to further implement FSB Bank’s business plan.

Following the March 2019 board meeting, Kevin Maroney, President and Chief Executive Officer of FSB, had informal discussions with several financial institutions who expressed an interest in potentially pursuing a strategic partnership with FSB. On June 26, 2019, the FSB board of directors established a Mergers and Acquisitions Committee, consisting of Dana Gavenda, Lowell Patric, and Kevin Maroney, to oversee the strategic alternatives process and make recommendations to the FSB board of directors.

On July 17, 2019, the members of the Mergers and Acquisitions Committee, or the committee, attended an informal meeting at the invitation of representatives of Company A, a New York community banking institution, to discuss their respective franchises and opportunities for a combined institution. The committee agreed to discuss the meeting with the FSB board of directors at its regularly scheduled July meeting and agreed that further discussions in the future could be warranted.

At the FSB board of directors’ regularly scheduled meeting on July 24, 2019, Mr. Maroney updated the FSB board of directors on the meeting with Company A. Mr. Maroney also discussed the recent performance of FSB and the challenges that it continued to face. The FSB board of directors agreed that the committee should continue to explore strategic alternatives for FSB, including a potential strategic transaction with Company A. The FSB board of directors also directed Mr. Maroney to request proposals from investment bankers, including Sandler O’Neill, to represent FSB in a potential strategic transaction.

On July 25, 2019, Mr. Maroney called the Chief Executive Officer of Company A to advise Company A that FSB was still evaluating all of its strategic options. The Chief Executive Officer of Company A expressed his continued interest in acquiring FSB and stated to Mr. Maroney that he would likely be sending FSB a non-binding letter of interest the following week.

 

59


Table of Contents

On August 8, 2019, Mr. Maroney met again with the Chief Executive Officer of Company A who proposed that FSB and Company A enter into a nondisclosure agreement and presented a draft to Mr. Maroney. Mr. Maroney advised the Chief Executive Officer of Company A that he would ask his counsel to review the nondisclosure agreement. Mr. Maroney and the Chief Executive Officer of Company A agreed to continue discussions.

On August 16, 2019, FSB and Company A executed a nondisclosure agreement for the purpose of facilitating further discussions.

On August 16, 2019, Mr. Maroney and several members of the FSB board of directors met with the Chief Executive Officer and two other executives of Company A to discuss the potential benefits of a combination of the two companies. At the meeting, the Chief Executive Officer of Company A delivered a non-binding letter of interest to the representatives of FSB. The letter discussed the merits of a combined institution, including the creation of a larger local, community-focused banking institution, the structure of a potential transaction, and the management of the resulting institution, including a proposal to appoint at least one FSB director to the board of directors of the combined institution. Company A indicated that the proposed merger consideration would consist of a combination of cash and stock, with an initial price range of $18.75 to $20.15 per share to stockholders of FSB. The letter of interest was subject to the completion of a satisfactory due diligence examination of FSB. Company A also requested that FSB enter into an approximately 60-day exclusivity agreement with Company A to allow for the completion of due diligence and the potential negotiation of a definitive merger agreement. On August 16, 2019, Mr. Maroney also received a call from David J. Nasca, the President and Chief Executive Officer of Evans, expressing Evans’ interest in potentially pursuing a strategic partnership with FSB and submitting a non-binding letter of interest. Mr. Maroney indicated that FSB would soon be engaging an investment banker to advise the FSB board of directors and organize a process for considering strategic alternatives, and that further discussions were warranted.

On August 20, 2019, FSB held a telephonic special meeting of the FSB board of directors. Mr. Maroney updated the FSB board of directors on the progress of his discussions with Company A. Mr. Maroney also advised the FSB board of directors of his discussion with Mr. Nasca and Evans’ interest in potentially acquiring FSB. Mr. Maroney then reviewed Company A’s non-binding written letter of interest with the FSB board of directors. Following a discussion of Company A’s letter of interest, the FSB board of directors discussed engaging an investment banker, and approved engaging Sandler O’Neill as FSB’s financial advisor for a potential transaction. A formal engagement letter was executed by Sandler O’Neill and FSB on August 27, 2019.

On August 27, 2019, the FSB board of directors convened a special meeting. A representative of Sandler O’Neill also participated in the meeting. The Sandler O’Neill representative gave a presentation with an overview of the process involved in selling or merging a bank. The presentation included a list of potential strategic partners in addition to Company A and financial/market information affecting their ability to acquire FSB. During and following the presentation, the Sandler O’Neill representative responded to various questions from the FSB board of directors. The FSB board of directors concluded that a sale process would more likely result in the best value for FSB stockholders. The FSB board of directors then directed representatives of Sandler O’Neill and FSB’s senior management team to advance the sale process preparations, including finalizing a list of potential interested acquirers and completing customary marketing materials (including a confidential information memorandum and proposed form of nondisclosure agreement). This process also involved establishing a virtual data room and “populating” the virtual data room with customary due diligence materials regarding FSB that prospective acquirers would typically request. The FSB board of directors also decided that it would invite Company A to participate in the process and would therefore not enter into an exclusivity agreement with Company A at that time.

On August 13, 2019, Mr. Nasca, met with Mr. Maroney to discuss potential interest in a transaction.

 

60


Table of Contents

Between August 28, 2019 and October 2, 2019, the virtual data room was populated with due diligence information and the confidential information memorandum was finalized. At the direction of FSB, representatives of Sandler O’Neill proceeded to make contact with the potential acquirers identified on the targeted list, which consisted of 11 financial institutions, including Evans and Company A. The group included public and private banks located in the State of New York or adjacent states. As a result of this process, in September and October 2019, FSB entered into nondisclosure agreements with three prospective acquirers, including Evans, each of which received a confidential information memorandum. Company A previously executed a non-disclosure agreement, but did not accept receipt of the confidential information memorandum.

At the FSB board of directors’ regularly scheduled meeting on September 25, 2019, Mr. Maroney updated the FSB board of directors on the status of the sale process. Representatives of Sandler O’Neill and Luse Gorman also participated in the meeting. Following this discussion, the FSB board of directors directed Sandler O’Neill to provide prospective buyers a deadline for submitting indications of interest of October 16, 2019. At the meeting, the FSB board of directors also added Tom Weldgen to the committee.

In early October 2019, Company A informed representatives of Sandler O’Neill that it would not participate in the FSB sale process and that it was withdrawing its non-binding written letter of interest.

On October 15, 2019, FSB held a telephonic special meeting of the FSB board of directors. Representatives of Sandler O’Neill and Luse Gorman also participated in the meeting. A Sandler O’Neill representative updated the FSB board of directors on Company A’s decision not to move forward in the sale process and that it had rescinded its non-binding written letter of interest.

On October 15, 2019, Evans held a telephonic special session of the executive committee of the Evans board of directors. Representatives of Keefe, Bruyette & Woods, Inc., or KBW, Evans’ financial advisor, also participated in the meeting. Evans management and KBW went through a preliminary overview of FSB and its market and reviewed a financial model prepared by Evans based on preliminary financial information of FSB. During and following the presentation, Evans management and the KBW representatives responded to various questions from the executive committee of the Evans board of directors. At the conclusion of the meeting, the executive committee of the Evans board of directors authorized delivery to FSB of a non-binding letter of interest.

On October 18, 2019, FSB held a telephonic special meeting of the FSB board of directors. Representatives of Sandler O’Neill and Luse Gorman also participated in the meeting. The Sandler O’Neill representative stated that two potential acquirers, including Evans and Company B, a New York community banking institution, submitted non-binding letters of interest to acquire FSB. Pursuant to Evans’ non-binding letter of interest dated October 16, 2019, each FSB stockholder, subject to a stockholder election, would receive either cash or Evans common stock for each share of FSB common stock they owned with a price range between $18.00 and $20.00 per share. Evans proposed that its total consideration would consist of 50% cash and 50% Evans common stock. Evans also proposed to appoint one FSB director to the board of directors of Evans and Evans Bank. Pursuant to Company B’s non-binding letter of interest, each FSB stockholder, subject to a stockholder election, would receive 50% cash and 50% Company B common stock for each share of FSB common stock they owned for a purchase price of $17.50 per share. Company B indicated they would consider appointing one FSB director to the board of directors of Company B and its subsidiary bank. Both proposals were subject to the completion of a satisfactory due diligence examination of FSB. Following a discussion of both proposals, the FSB board of directors directed the representative of Sandler O’Neill to speak to representatives of Company A in order to reengage them in the FSB sale process.

On October 24, 2019, the FSB board of directors held its regularly scheduled meeting. Representatives of Sandler O’Neill and Luse Gorman also participated in the meeting. A representative from Sandler O’Neill began by giving a presentation summarizing the transaction process to date, a copy of which was distributed to the FSB board of directors. The Sandler O’Neill representative gave a market update for financial institutions and

 

61


Table of Contents

presented a summary of financial and pricing information for merger and acquisition transactions of a size comparable to that which could be anticipated of FSB. The Sandler O’Neill representative summarized the results of the process of contacting other financial institutions to gauge their interest in acquiring FSB and to solicit competitive proposals. The Sandler O’Neill representative also summarized his conversations with each of the entities and the general reasons that certain entities declined to submit a proposal. Sandler O’Neill had further discussions with Company A, but Company A refused to re-enter the sale process. Although Company A had withdrawn its proposal, the Sandler O’Neill representative described the financial aspects of Company A’s proposal and then compared it in detail to a description of the financial aspects of the proposals made by each of Company B and Evans. The FSB board of directors first discussed Evans’ proposal, noting that the proposed purchase price range of $18.00 to $20.00 per share (50% cash and 50% stock) and transaction multiples were significantly higher than the proposed purchase price of Company B’s proposal. The FSB board of directors then discussed Company B’s proposal and Company A’s previously withdrawn proposal.

The Sandler O’Neill representative then presented pro forma models reflecting a transaction between FSB and each of Evans, Company A, and Company B, and compared the implied metrics of each potential transaction, highlighting various pricing metrics and the capital levels of the resulting institution. The Sandler O’Neill representative noted the assumptions used to prepare the analyses and pricing metrics of each potential transaction and the financial information about the pro forma company. The Sandler O’Neill representative also outlined the typical timeline for a merger transaction. Following the discussion, the FSB board of directors authorized representatives of Sandler O’Neill to invite Evans to conduct further due diligence and to finalize its proposal by providing a final non-binding letter of interest with final pricing information. The FSB board of directors also instructed representatives of Sandler O’Neill to contact Company B to determine whether Company B would increase its proposed price into the price range proposed by Evans.

On October 25, 2019, representatives of Sandler O’Neill discussed with representatives of Company B the possibility of increasing Company B’s proposed offer price. Company B declined to increase the price in its proposal.

On November 11, 2019, senior management of Evans met for due diligence discussions with senior management of FSB in Rochester, New York. The parties discussed FSB’s business operations, including financial performance and future expectations, employee matters and regulatory issues. Following the meeting, Evans continued to conduct due diligence.

Between November 11, 2019 and November 25, 2019, Evans management conducted further due diligence on FSB and, with representatives of KBW, considered the potential financial aspects of a transaction with FSB.

On November 25, 2019 and November 26, 2019, Evans held telephonic special meetings of the Evans board of directors. Members of the Evans management team, as well as representatives of Covington and KBW, were also in attendance at the meetings. The Evans board of directors discussed with Evans management, KBW and Covington the potential per share purchase price in the context of the other transaction terms in the letter of interest, the results of Evans’ due diligence investigation of FSB to date, a review of the potential financial impact of an acquisition of FSB on Evans and the strategic rationale for the acquisition of FSB. During the meetings, the Evans board of directors approved a per share purchase price of $17.80 and the delivery to FSB of a revised non-binding letter of interest.

On November 26, 2019, Evans submitted an updated written non-binding letter of interest, pursuant to which it proposed to pay a price of $17.80 per share for FSB common stock (50% cash and 50% stock with a stockholder election). The updated letter of interest also assumed the resolution of one FSB loan, which we refer to as the credit. In addition, the updated written non-binding letter of interest included that severance payments would be made to any terminated FSB employees pursuant to FSB’s previous severance practices. Other than the assumed resolution of the credit, the proposed price per share and the proposed severance for terminated FSB employees, the material terms of the proposal were unchanged from the initial letter dated October 16, 2019.

 

62


Table of Contents

At the November 27, 2019 special meeting of the FSB board of directors, the FSB board of directors reviewed and discussed Evans’ revised proposal. Representatives of Sandler O’Neill and Luse Gorman also attended the meeting. A Sandler O’Neill representative then reviewed an updated presentation, a copy of which had been previously distributed to the FSB board of directors. The Sandler O’Neill representative summarized the history of the sale process to date. The Sandler O’Neill representative then reviewed Evans’ proposal, including pricing metrics in comparison to recent comparable regional bank and thrift transactions, and provided information about the pro forma branch network and composition of the loan and deposit portfolios of FSB and Evans on a combined basis. The Sandler O’Neill representative noted that Evans’ revised proposal significantly lowered the potential severance for FSB employees from a maximum severance equal to two weeks’ salary per year of employment up to 26 weeks to a maximum severance equal to two weeks’ salary per year of employment up to eight weeks. The representative of Sandler O’Neill also indicated that Evans would consider establishing a retention bonus pool for key FSB employees. During the meeting, the Sandler O’Neill representative responded to various questions from the FSB board of directors and counsel about the presentation and the value of FSB’s franchise.

The FSB board of directors then excused representatives of Sandler O’Neill and Luse Gorman from the meeting and discussed Evans’ proposal at length. Following the discussion, the FSB board of directors directed Sandler O’Neill to communicate to Evans that FSB would accept its proposal if Evans agreed to amend the employee severance provisions in the letter of interest consistent with those proposed in Evans’ original letter of interest. Subject to changing the severance provisions, the FSB board of directors unanimously voted to authorize Mr. Maroney to execute the non-binding letter of interest with Evans.

Based on feedback from Sandler O’Neill that the Evans severance policy provided better severance benefits than FSB’s historical severance practices, and after consideration of the matter with certain members of the Evans board of directors, Evans revised its updated written non-binding letter of interest to provide that FSB employees who are terminated following the transaction would be paid severance benefits based on the Evans severance policy.

Later that evening, the Sandler O’Neill representative notified Mr. Maroney that Evans agreed to change the severance provisions as requested by the FSB board of directors. Subsequently, Mr. Maroney executed the letter of interest with Evans.

On December 9, 2019, Evans’ legal counsel, Covington, provided Luse Gorman with an initial draft of the merger agreement.

On December 12, 2019, the committee held a telephonic meeting to review and discuss the draft merger agreement. Representatives of Sandler O’Neill and Luse Gorman also attended the meeting.

On December 12, 2019, Covington provided Luse Gorman drafts of ancillary documents, including the director and executive officer voting agreement.

On December 13, 2019, Luse Gorman sent FSB’s proposed revisions to the merger agreement to Covington and on December 14, 2019, Luse Gorman sent FSB’s proposed revisions to the voting agreement to Covington.

On December 15, 2019, Covington circulated a revised draft of the merger agreement to Luse Gorman.

On December 16, 2019, Luse Gorman had a call with Covington to negotiate the terms of the merger agreement.

On December 16, 2019, FSB’s management, together with representatives of Sandler O’Neill, conducted due diligence interviews of senior management of Evans.

 

63


Table of Contents

On December 17, 2019, representatives of Luse Gorman updated the committee on the status of negotiations relating to the merger agreement.

On December 17, 2019, Luse Gorman circulated a revised draft of the merger agreement to Covington and revised drafts of certain ancillary documents.

On December 17, 2019, Covington circulated a revised draft of the merger agreement to Luse Gorman, following which Luse Gorman had another call with Covington to negotiate unresolved and other terms of the merger agreement, including a proposed price adjustment and closing condition related to the resolution of the credit. Following the call, Covington circulated a revised draft of the merger agreement to Luse Gorman.

On December 18, 2019, Covington circulated a revised draft of the merger agreement to Luse Gorman reflecting the proposed closing condition relating to the credit and the price adjustment discussed the previous day.

On December 18, 2019, the committee held a telephonic meeting to receive a status update on the negotiations relating to the merger and to review and discuss the revised merger agreement, including the price adjustment and closing condition related to the resolution of the credit.

On December 18 and 19, 2019, management of FSB, representatives of Luse Gorman, management of Evans and representatives of Covington had telephone calls regarding changes to the merger agreement and exchanged drafts of the merger agreement. Among another things, the revised draft of the merger agreement removed the closing condition related to the resolution of the credit. It also provided for a revision to the price adjustment such that the maximum proposed downward price adjustment of the per share consideration would be $0.17 per share for FSB common stock and would be based on the resolution of the credit.

On December 19, 2019, the committee voted unanimously to recommend approval of the revised merger agreement to the full FSB board of directors.

On December 19, 2019, FSB convened a special meeting of the FSB board of directors to review the merger agreement and the proposed merger with Evans. Representatives of Sandler O’Neill and Luse Gorman attended the meeting telephonically. The FSB board of directors had been provided with various information and documents in advance of the meeting, including the merger agreement, the voting agreement, a summary of the material terms of the merger agreement and a financial presentation provided by Sandler O’Neill.

Representatives of Luse Gorman reviewed in detail the terms of each major section of the merger agreement and the voting agreement and answered questions relating to the merger agreement and related ancillary documents and disclosure schedules. Representatives of Luse Gorman also reviewed with the FSB board of directors its fiduciary duties.

A representative of Sandler O’Neill summarized the historical financial performance of Evans and provided a financial overview of the proposed merger. The Sandler O’Neill representative discussed the pro forma branch footprint and the pro forma capital position of the combined company. The Sandler O’Neill representative also highlighted pricing measures for the proposed transaction and compared them to merger transactions involving comparably sized financial institutions in the Mid-Atlantic and Northeast regions that had been completed since January 1, 2016. The Sandler O’Neill representative also discussed merger-related costs and answered questions from the FSB board of directors.

The Sandler O’Neill representative then delivered Sandler O’Neill’s oral opinion that, as of December 19, 2019, and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken, as set forth in the opinion, the merger consideration to be paid to FSB common stockholders

 

64


Table of Contents

was fair from a financial point of view. Sandler O’Neill’s written opinion, dated December 19, 2019, was delivered to the FSB board of directors following the meeting.

Following the presentations of and discussions with its financial and legal advisors, the FSB board of directors reviewed and discussed the proposed merger agreement and merger.

Following consideration of this information, including those factors described under “—FSB’s Reasons for the Mergers and Recommendation of the FSB Board of Directors,” the FSB board of directors determined that the merger agreement and the transactions contemplated thereby were advisable and in the best interest of FSB and its stockholders. The FSB board of directors then unanimously voted to approve and adopt the merger agreement and the transactions contemplated thereby and recommend that FSB stockholders vote to approve the merger agreement and the transactions contemplated thereby.

On December 19, 2019, the Evans board of directors held a special meeting to consider the terms of the mergers and merger agreement. Representatives of KBW and Covington attended the meeting. The Evans board of directors had been provided with various information and documents in advance of the meeting, including the merger agreement, the voting agreement and a summary of the material terms of the merger agreement. At the meeting, members of Evans’ management reported on the status of due diligence and negotiations with FSB. Also at the meeting, representatives of KBW reviewed with the Evans board of directors financial aspects of the proposed merger. At the meeting, Covington reviewed with the Evans board of directors its fiduciary duties and reviewed the key terms of the merger agreement and related agreements (including the voting agreements), and answered questions relating to the merger agreement and related ancillary documents and disclosure schedules.

The Evans board of directors discussed with members of the Evans executive management team, KBW and Covington the potential strategic benefits of acquiring FSB, including FSB’s position and operations in the market of Western New York, the financial aspects of the transaction and the proposed plan for integrating the two organizations. After considering the proposed terms of the merger agreement, the terms of the voting agreements, and taking into consideration the matters discussed during that meeting and prior meetings of the Evans board of directors, including the factors described under “—Evans’ Reasons for the Mergers,” the Evans board of directors determined that the merger was consistent with Evans’ business strategies and in the best interests of Evans and Evans shareholders and the Evans board of directors voted to approve and adopt the merger agreement and the other transactions contemplated by the merger agreement.

Following the completion of the FSB and Evans board meetings, the merger agreement was executed and delivered. Following the close of the market on December 19, 2019, Evans and FSB issued a joint press release announcing the execution of the merger agreement.

On January 15, 2020, FSB sold the credit that was the subject of a potential price adjustment in the merger agreement such that no price adjustment would be applicable pursuant to the terms of the merger agreement.

On March 5, 2020, FSB and Evans amended the merger agreement to remove the price adjustment provisions.

FSB’s Reasons for the Mergers and Recommendation of the FSB Board of Directors

The FSB board of directors unanimously determined that the merger with Evans is in the best interests of FSB and its stockholders and approved and declared advisable the merger agreement and the transactions contemplated therein, including the mergers, and recommends that FSB stockholders vote “FOR” the adoption of the FSB merger proposal. In reaching its decision to approve and recommend the adoption of the merger agreement and the transactions contemplated by the merger agreement, the FSB board of directors evaluated the merger agreement and the mergers in consultation with FSB’s management, as well as FSB’s financial and legal advisors, and considered a number of factors, including, without limitation, the following material factors, which are not presented in order of priority:

 

   

a review of FSB’s business, operations, properties, assets, financial condition, operating results and prospects, and FSB board of directors’ and senior management’s understanding of Evans’ business,

 

65


Table of Contents
 

operations, properties, assets, financial condition, operating results, historical market prices and prospects, including information obtained through due diligence;

 

   

a review of the risks and prospects of FSB remaining independent, including the challenges of the current financial, operating, regulatory and interest rate environment, generally; the increasing costs associated with banking regulation, compliance and technology, generally; and the anticipated costs of continuing to develop and enhance FSB’s business capabilities;

 

   

its consideration that the transaction with Evans was more favorable to the FSB stockholders than the potential value that might result from other alternatives reasonably available to FSB, including, but not limited to, remaining independent;

 

   

the prospects of prudently and profitably deploying FSB’s excess capital in a reasonable period of time;

 

   

that 50% of the merger consideration would be in Evans common stock and the potential for FSB stockholders to participate in the future earnings and growth of the combined company;

 

   

the fact that the cash consideration offers FSB stockholders the opportunity to realize cash for the value of their shares with immediate certainty of value;

 

   

the FSB board of directors’ belief that, based on the complementary nature of Evans’ business and operations, the transaction is likely to provide substantial value to FSB stockholders, including the combined company’s longstanding and strong market presence in Western New York, a more diversified loan portfolio and attractive funding base and the expected pro forma earnings growth prospects compared to on a stand-alone basis;

 

   

the attractiveness and strategic fit of Evans as a potential merger partner with respect to its business, financial condition, results of operations and management and its knowledge of the Western New York banking market;

 

   

FSB’s and Evans’ shared corporate values and commitment to serve their clients and communities, and the effects of the merger on FSB Bank’s customers;

 

   

Evans’ commitment to enhancing its strategic position in the Rochester, New York market area and increased customer convenience of the expanded branch network of Evans;

 

   

the expanded possibilities, including organic growth potential and future acquisitions, that would be available to the combined company, given its larger size, asset base, diverse product offerings, capital and liquidity;

 

   

the historical performance of Evans common stock, Evans’ greater market capitalization and the future cash dividends anticipated to be received by FSB stockholders who elect to receive Evans common stock;

 

   

the merger with Evans was the result of a solicitation process conducted by FSB with the assistance of Sandler O’Neill;

 

   

the ability of Evans to complete the merger from a business, financial and regulatory perspective;

 

   

its review and discussions with FSB’s management concerning the due diligence examination of the business of Evans;

 

   

the FSB board of directors’ expectation that the combined company will have a strong capital position upon completion of the transaction, including the expectation that Evans will maintain its dividend;

 

   

the anticipated effect of the merger on FSB’s employees including the prospects for continued employment in a larger organization and various benefits agreed to be provided to FSB’s employees (including that FSB’s employees whom Evans elects not to retain after the effective time will be entitled to severance benefits);

 

66


Table of Contents
   

the written opinion, dated December 19, 2019, of Sandler O’Neill to the FSB board of directors as to the fairness, from a financial point of view and as of the date of such opinion, to the holders of FSB common stock of the merger consideration, as more fully described under “—Opinion of FSB’s Financial Advisor;”

 

   

the expected tax treatment of the merger and second merger, taken together, as a “reorganization” for United States federal income tax purposes;

 

   

certain structural protections included in the merger agreement, including:

 

   

the fact that the merger agreement does not preclude a third party from making an unsolicited acquisition proposal to FSB and that, under certain circumstances more fully described under “The Merger Agreement—Agreement Not to Solicit Other Offers,” FSB may furnish non-public information to, and enter into discussions with, such a third party regarding a qualifying acquisition proposal; and

 

   

both parties’ covenant to use their reasonable best efforts to obtain the required regulatory approvals for the mergers; and

 

   

the FSB board of directors’ review with FSB’s outside legal counsel of the terms of the merger agreement.

The board of directors of FSB also considered the potential risks related to the mergers but concluded that the anticipated benefits of the mergers were likely to substantially outweigh these risks. These potential risks included:

 

   

the potential risks associated with achieving anticipated cost synergies and savings and successfully integrating FSB’s business, operations and workforce with those of Evans;

 

   

the regulatory and other approvals required to complete the mergers and the possibility that such regulatory approvals may not be received in a timely manner and may include the imposition of burdensome conditions;

 

   

the merger agreement provisions generally requiring FSB to conduct its business in the ordinary course and the other restrictions on the conduct of FSB’s business prior to completion of the merger, which may delay or prevent FSB from undertaking business opportunities that may arise pending completion of the mergers;

 

   

with the stock consideration based on a fixed exchange ratio, the risk that the stock consideration to be paid to FSB stockholders could be adversely affected by a decrease in the trading price of Evans common stock prior to the closing of the mergers;

 

   

the potential for diversion of management and employee attention, and for employee attrition, during the period prior to the completion of the mergers and the potential effect on FSB’s business and relations with customers, service providers and other stakeholders, whether or not the mergers are completed;

 

   

the interests of certain of FSB’s directors and officers may be different from, or in addition to, the interests of other FSB stockholders as described under the heading “—Interests of FSB’s Directors and Executive Officers in the Mergers;”

 

   

certain provisions of the merger agreement that prohibit FSB from soliciting, and limit its ability to respond to, proposals for alternative transactions;

 

   

the risk of litigation arising from stockholders because of the merger agreement or the transactions contemplated thereby;

 

   

the fact that FSB stockholders would not be entitled to appraisal or dissenters’ rights in connection with the mergers;

 

67


Table of Contents
   

the fact that, while the mergers are expected to be completed, there are no assurances that all conditions to the parties’ obligations to complete the mergers will be satisfied or waived (if applicable), and as a result, it is possible that the mergers may not be completed, and the fact that, if the mergers are not completed, (i) FSB will have incurred significant risk, transaction expenses and opportunity costs, including the possibility of disruption to its operations, diversion of management and employee attention, employee attrition and a potentially negative effect on FSB’s business and client relationships, (ii) depending on the circumstances that caused the mergers not to be completed, it is likely that the trading price of FSB common stock will decline, potentially significantly and (iii) the market’s perception of FSB’s prospects could be adversely affected;

 

   

the risk of a potential price adjustment for FSB stockholders depending on the ability of FSB to dispose of the credit and at a particular price;

 

   

FSB’s obligation to pay Evans a termination fee of $1.4 million in certain circumstances, as described under “The Merger Agreement—Termination Fee,” which may deter others from proposing an alternative transaction that may be more advantageous to FSB stockholders; and

 

   

the other risks described under “Risk Factors,” and the risks of investing in Evans common stock identified in the “Risk Factors” sections of Evans’ periodic reports filed with the SEC and incorporated by reference herein.

The foregoing discussion of the information and factors considered by the FSB board of directors is not intended to be exhaustive, but, rather, includes the material factors considered by the FSB board of directors. The above factors are not presented in any order of priority. In view of the wide variety of factors considered by the FSB board of directors in connection with its evaluation of the merger and the complexity of these matters, the FSB board of directors did not attempt to quantify, rank or otherwise assign relative weights to specific factors that it considered in reaching its decision. Furthermore, in considering the factors described above, individual members of the FSB board of directors may have given different weights to different factors.

The FSB board of directors evaluated the factors described above and reached the unanimous decision that the merger is advisable, fair to and in the best interests of FSB and its stockholders. The FSB board of directors realized there can be no assurance about future results, including results expected or considered in the factors listed above. However, the FSB board of directors concluded the potential positive factors outweighed the potential risks of completing the merger. It should be noted that this explanation of the FSB board of directors’ reasoning and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors described under “Cautionary Statement Regarding Forward-Looking Statements.”

On the basis of these considerations, the FSB board of directors unanimously approved and adopted the merger agreement and the transactions contemplated thereby and recommends that FSB stockholders vote “FOR” the approval of the merger proposal.

Opinion of FSB’s Financial Advisor

FSB retained Sandler O’Neill to act as financial advisor to the FSB board of directors in connection with FSB’s consideration of a possible business combination. FSB selected Sandler O’Neill to act as its financial advisor because Sandler O’Neill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Sandler O’Neill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.

Sandler O’Neill acted as financial advisor to the FSB board of directors in connection with the proposed transaction with Evans and participated in certain of the negotiations leading to the execution of the merger agreement. At the December 19, 2019 meeting at which the FSB board of directors considered the merger and

 

68


Table of Contents

the merger agreement, Sandler O’Neill delivered to the FSB board of directors its oral opinion, which was subsequently confirmed in writing, to the effect that, as of such date, the merger consideration was fair to the holders of FSB common stock from a financial point of view. The full text of Sandler O’Neill’s opinion is attached as Annex C to this proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the full text of the opinion. Holders of FSB common stock are urged to read the entire opinion carefully in connection with their consideration of the proposed transaction.

Sandler O’Neill’s opinion was directed to the FSB board of directors in connection with its consideration of the merger and the merger agreement and does not constitute a recommendation to any FSB stockholder as to how any such stockholder should vote at any meeting of stockholders called to consider and vote upon the approval of the merger and the merger agreement. Sandler O’Neill’s opinion was directed only to the fairness, from a financial point of view, of the merger consideration to the holders of FSB common stock and did not address the underlying business decision of FSB to engage in the merger, the form or structure of the merger or any other transactions contemplated in the merger agreement, the relative merits of the merger as compared to any other alternative transactions or business strategies that might exist for FSB or the effect of any other transaction in which FSB might engage. Sandler O’Neill also did not express any opinion as to the fairness of the amount or nature of the compensation to be received in the merger by any officer, director or employee of FSB, or any class of such persons, if any, relative to the compensation to be received in the transaction by any other stockholder. Sandler O’Neill’s opinion was approved by Sandler O’Neill’s fairness opinion committee.

In connection with its opinion, Sandler O’Neill reviewed and considered, among other things:

 

   

a draft of the merger agreement, dated December 18, 2019;

 

   

certain publicly available financial statements and other historical financial information of FSB and its banking subsidiary that Sandler O’Neill deemed relevant;

 

   

certain publicly available financial statements and other historical financial information of Evans and its banking subsidiary that Sandler O’Neill deemed relevant;

 

   

certain internal financial projections for FSB for the years ending December 31, 2019 and December 31, 2020, as well as estimated long-term annual balance sheet and net income growth rates for the years ending December 31, 2021 through December 31, 2023, as provided by the senior management of FSB;

 

   

publicly available median analyst earnings per share estimates for Evans for the quarter ending December 31, 2019 and the year ending December 31, 2020, as well as estimated long-term annual balance sheet and earnings per share growth rates for the years ending December 31, 2021 through December 31, 2023 and estimated dividends per share for the years ending December 31, 2020 through December 31, 2023;

 

   

the pro forma financial impact of the merger on Evans based on certain assumptions relating to purchase accounting adjustments, transaction expenses and cost savings, as well as an estimated long-term annual balance sheet growth rate for FSB for the years ending December 31, 2020 through December 31, 2023 and estimated annual return on average assets for FSB for the years ending December 31, 2021 through December 31, 2023;

 

   

the publicly reported historical price and trading activity for FSB common stock and Evans common stock, including a comparison of certain stock market information for FSB common stock and Evans common stock and certain stock indices as well as publicly available information for certain other similar companies, the securities of which are publicly traded;

 

69


Table of Contents
   

a comparison of certain financial information for FSB and Evans with similar financial institutions for which information is publicly available;

 

   

the financial terms of certain recent business combinations in the bank and thrift industry (on a regional and nationwide basis), to the extent publicly available;

 

   

the current market environment generally and the banking environment in particular; and

 

   

such other information, financial studies, analyses and investigations and financial, economic and market criteria as Sandler O’Neill considered relevant.

Sandler O’Neill also discussed with certain members of the senior management of FSB the business, financial condition, results of operations and prospects of FSB and held similar discussions with certain members of the senior management of Evans and its representatives regarding the business, financial condition, results of operations and prospects of Evans.

In performing its review, Sandler O’Neill relied upon the accuracy and completeness of all of the financial and other information that was available to and reviewed by Sandler O’Neill from public sources, that was provided to Sandler O’Neill by FSB or Evans, or their respective representatives, or that was otherwise reviewed by Sandler O’Neill, and Sandler O’Neill assumed such accuracy and completeness for purposes of rendering its opinion without any independent verification or investigation. Sandler O’Neill relied on the assurances of the respective managements of FSB and Evans that they were not aware of any facts or circumstances that would have made any of such information inaccurate or misleading. Sandler O’Neill was not asked to and did not undertake an independent verification of any of such information and Sandler O’Neill did not assume any responsibility or liability for the accuracy or completeness thereof. Sandler O’Neill did not make an independent evaluation or perform an appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of FSB or Evans or any of their respective subsidiaries, nor was Sandler O’Neill furnished with any such evaluations or appraisals. Sandler O’Neill rendered no opinion or evaluation on the collectability of any assets or the future performance of any loans of FSB or Evans or any of their respective subsidiaries. Sandler O’Neill did not make an independent evaluation of the adequacy of the allowance for loan losses of FSB or Evans, or of the combined entity after the transaction, and Sandler O’Neill did not review any individual credit files relating to FSB or Evans or any of their respective subsidiaries. Sandler O’Neill assumed, with FSB’s consent, that the respective allowances for loan losses for both FSB and Evans were adequate to cover such losses and would be adequate on a pro forma basis for the combined entity.

In preparing its analyses, Sandler O’Neill used certain internal financial projections for FSB for the years ending December 31, 2019 through December 31, 2020 as well as estimated long-term annual balance sheet and net income growth rates for the years ending December 31, 2021 through December 31, 2023, as provided by the senior management of FSB. In addition, Sandler O’Neill used publicly available median analyst earnings per share estimates for Evans for the quarter ending December 31, 2019 and the year ending December 31, 2020, as well as estimated long-term annual balance sheet and earnings per share growth rates for the years ending December 31, 2021 through December 31, 2023 and estimated dividends per share for the years ending December 31, 2020 through December 31, 2023. Sandler O’Neill also received and used in its pro forma analyses certain assumptions relating to purchase accounting adjustments, transaction expenses and cost savings, as well as an estimated long-term annual balance sheet growth rate for FSB for the years ending December 31, 2020 through December 31, 2023 and estimated annual return on average assets for FSB for the years ending December 31, 2021 through December 31, 2023. With respect to the foregoing information, the respective senior managements of FSB and Evans confirmed to Sandler O’Neill that such information reflected (or, in the case of the publicly available analyst estimates referred to above, were consistent with) the best currently available projections, estimates and judgments of those respective managements as to the future financial performance of FSB and Evans, respectively, and the other matters covered thereby, and Sandler O’Neill assumed that the future financial performance reflected in such information would be achieved. Sandler O’Neill expressed no opinion as to such information, or the assumptions on which such information was based. Sandler O’Neill also assumed that there had been no material change in the respective assets, financial condition, results of operations, business or

 

70


Table of Contents

prospects of FSB or Evans since the date of the most recent financial statements made available to Sandler O’Neill. Sandler O’Neill assumed in all respects material to its analyses that FSB and Evans would remain as going concerns for all periods relevant to its analyses.

Sandler O’Neill also assumed, with FSB’s consent, that (i) each of the parties to the merger agreement would comply in all material respects with all material terms and conditions of the merger agreement and all related agreements, that all of the representations and warranties contained in such agreements were true and correct in all material respects, that each of the parties to such agreements would perform in all material respects all of the covenants and other obligations required to be performed by such party under such agreements and that the conditions precedent in such agreements were not and would not be waived, (ii) in the course of obtaining the necessary regulatory or third party approvals, consents and releases with respect to the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on FSB, Evans, the merger or any related transactions, and (iii) the merger and any related transactions would be consummated in accordance with the terms of the merger agreement without any waiver, modification or amendment of any material term, condition or agreement thereof and in compliance with all applicable laws and other requirements. Finally, with FSB’s consent, Sandler O’Neill relied upon the advice that FSB received from its legal, accounting and tax advisors as to all legal, accounting and tax matters relating to the merger and the other transactions contemplated by the merger agreement. Sandler O’Neill expressed no opinion as to any such matters.

Sander O’Neill’s opinion was necessarily based on financial, regulatory, economic, market and other conditions as in effect on, and the information made available to Sandler O’Neill as of, the date thereof. Events occurring after the date thereof could materially affect Sandler O’Neill’s opinion. Sandler O’Neill has not undertaken to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date thereof. Sandler O’Neill expressed no opinion as to the trading value of FSB common stock or Evans common stock at any time or what the value of Evans common stock would be once it is actually received by the holders of FSB common stock.

In rendering its opinion, Sandler O’Neill performed a variety of financial analyses. The summary below is not a complete description of all the analyses underlying Sandler O’Neill’s opinion or the presentation made by Sandler O’Neill to the FSB board of directors, but is a summary of the material analyses performed and presented by Sandler O’Neill. The summary includes information presented in tabular format. In order to fully understand the financial analyses, these tables must be read together with the accompanying text. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. The process, therefore, is not necessarily susceptible to a partial analysis or summary description. Sandler O’Neill believes that its analyses must be considered as a whole and that selecting portions of the factors and analyses to be considered without considering all factors and analyses, or attempting to ascribe relative weights to some or all such factors and analyses, could create an incomplete view of the evaluation process underlying its opinion. Also, no company included in Sandler O’Neill’s comparative analyses described below is identical to FSB or Evans and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading values or transaction values, as the case may be, of FSB and Evans and the companies to which they were compared. In arriving at its opinion, Sandler O’Neill did not attribute any particular weight to any analysis or factor that it considered. Rather, Sandler O’Neill made qualitative judgments as to the significance and relevance of each analysis and factor. Sandler O’Neill did not form an opinion as to whether any individual analysis or factor (positive or negative) considered in isolation supported or failed to support its opinion, rather, Sandler O’Neill made its determination as to the fairness of the merger consideration to the holders of FSB common stock on the basis of its experience and professional judgment after considering the results of all its analyses taken as a whole.

 

71


Table of Contents

In performing its analyses, Sandler O’Neill also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which cannot be predicted and are beyond the control of FSB, Evans and Sandler O’Neill. The analyses performed by Sandler O’Neill are not necessarily indicative of actual values or future results, both of which may be significantly more or less favorable than suggested by such analyses. Sandler O’Neill prepared its analyses solely for purposes of rendering its opinion and provided such analyses to the FSB board of directors at its December 19, 2019 meeting. Estimates on the values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially different. Accordingly, Sandler O’Neill’s analyses do not necessarily reflect the value of FSB common stock or Evans common stock or the prices at which FSB or Evans common stock may be sold at any time. The analyses of Sandler O’Neill and its opinion were among a number of factors taken into consideration by the FSB board of directors in making its determination to approve the merger agreement and the analyses described below should not be viewed as determinative of the decision of the FSB board of directors with respect to the fairness of the merger consideration.

Summary of Proposed Transaction Consideration and Implied Transaction Metrics.

Sandler O’Neill reviewed the financial terms of the proposed transaction. Pursuant to the terms of the merger agreement, at the effective time of the merger, each share of FSB common stock issued and outstanding immediately prior to the effective time of the merger, except for certain shares as set forth in the merger agreement, will be converted into the right to receive (i) for each share of FSB common stock with respect to which a cash election has been effectively made and not revoked or deemed revoked pursuant to the merger agreement, an amount in cash equal to $17.80 (assuming 0% write-down of an outstanding FSB credit) or $17.63 (assuming 100% write-down of an outstanding FSB credit); or (ii) for each share of FSB common stock with respect to which a stock election has been effectively made and not revoked or deemed revoked pursuant to the merger agreement, a number of validly issued, fully paid and non-assessable shares of Evans common stock equal to 0.4394 (assuming 0% write-down of an outstanding FSB credit) or 0.4352 (assuming 100% write-down of an outstanding FSB credit). The merger agreement provides, generally, that 50% of the total number of shares of FSB common stock will be converted into the stock consideration and 50% of such shares of FSB common stock will be converted into the cash consideration in accordance with the election and allocation procedures set forth in the merger agreement. Based on the closing price per share of Evans common stock on December 18, 2019 of $40.64 and based upon 1,940,661 FSB common shares outstanding, inclusive of 172,080 options outstanding with a weighted average exercise price of $16.82, Sandler O’Neill calculated an aggregate implied transaction value of $34.8 million (assuming 0% write-down of an outstanding FSB credit) or $34.4 million (assuming 100% write-down of an outstanding FSB credit).

Based upon financial information for FSB as of or for the last twelve months, or LTM, ended September 30, 2019 and the closing price of FSB common stock on December 18, 2019, Sandler O’Neill calculated the following implied transaction metrics assuming 0% write-down of an outstanding FSB credit:

 

Transaction Price Per Share / FSB Book Value Per Share

     108

Transaction Price Per Share / FSB Tangible Book Value Per Share

     108

Transaction Price Per Share / LTM FSB Earnings Per Share

     NM  

Transaction Price Per Share / 2019 Estimated FSB Earnings Per Share¹

     NM  

Transaction Price Per Share / 2020 Estimated FSB Earnings Per Share¹

     NM  

Tangible Book Premium / FSB Core Deposits (CDs > $100,000)²

     1.8

Tangible Book Premium / FSB Core Deposits (CDs > $250,000)³

     1.4

Market Premium as of December 18, 2019

     6.1

 

1

As provided by FSB senior management

2

Core deposits defined as total deposits less time deposits with balances greater than $100,000

3

Core deposits defined as total deposits less time deposits with balances greater than $250,000

 

72


Table of Contents

Based upon financial information for FSB as of or for the LTM ended September 30, 2019 and the closing price of FSB common stock on December 18, 2019, Sandler O’Neill calculated the following implied transaction metrics assuming 100% write-down of an outstanding FSB credit:

 

Transaction Price Per Share / FSB Book Value Per Share

     107

Transaction Price Per Share / FSB Tangible Book Value Per Share

     107

Transaction Price Per Share / LTM FSB Earnings Per Share

     NM  

Transaction Price Per Share / 2019 Estimated FSB Earnings Per Share¹

     NM  

Transaction Price Per Share / 2020 Estimated FSB Earnings Per Share¹

     NM  

 

Tangible Book Premium / FSB Core Deposits (CDs > $100,000)²

     1.6

Tangible Book Premium / FSB Core Deposits (CDs > $250,000)³

     1.2

Market Premium as of December 18, 2019

     5.0

 

1

As provided by FSB senior management

2

Core deposits defined as total deposits less time deposits with balances greater than $100,000

3

Core deposits defined as total deposits less time deposits with balances greater than $250,000

Stock Trading History.

Sandler O’Neill reviewed the publicly available historical reported trading prices of FSB common stock and Evans common stock for the one-year and three-year periods ended December 18, 2019. Sandler O’Neill then compared the relationship between the movements in the price of FSB common stock and Evans common stock, respectively, to movements in their respective peer groups (as described below) as well as certain stock indices.

FSB’s One-Year Stock Performance

 

     Beginning Value
December 18, 2018
    Ending Value
December 18, 2019
 

FSB

     100     101.9

FSB Peer Group

     100     104.9

S&P 500 Index

     100     125.3

Nasdaq Bank Index

     100     121.1

FSB’s Three-Year Stock Performance

 

     Beginning Value
December 16, 2016
    Ending Value
December 18, 2019
 

FSB

     100     116.7

FSB Peer Group

     100     134.8

S&P 500 Index

     100     141.3

Nasdaq Bank Index

     100     105.6

Evans’ One-Year Stock Performance

 

     Beginning Value
December 18, 2018
    Ending Value
December 18, 2019
 

Evans

     100     124.3

Evans Peer Group

     100     116.0

S&P 500 Index

     100     125.3

Nasdaq Bank Index

     100     121.1

 

73


Table of Contents

Evans’ Three-Year Stock Performance

 

     Beginning Value
December 16, 2016
    Ending Value
December 18, 2019
 

Evans

     100     110.3

Evans Peer Group

     100     126.6

S&P 500 Index

     100     141.3

Nasdaq Bank Index

     100     105.6

Comparable Company Analyses.

Sandler O’Neill used publicly available information to compare selected financial information for FSB with a group of financial institutions selected by Sandler O’Neill. The FSB peer group included publicly-traded thrifts nationwide with total assets between $200 million and $600 million and with a 3 month average daily trading volume multiplied by current stock price, as of December 18, 2019, greater than $10,000, but excluded targets of announced merger transactions, or the FSB Peer Group. The FSB Peer Group consisted of the following companies:

 

Bancorp 34, Inc.

  

Mid-Southern Bancorp, Inc.

CBM Bancorp, Inc.

  

MSB Financial Corp.

Century Next Financial Corporation

  

Ottawa Bancorp, Inc.

Home Federal Bancorp, Inc. of Louisiana

  

Royal Financial, Inc.

HV Bancorp, Inc.

  

WVS Financial Corp.

The analysis compared publicly available financial information for FSB with corresponding data for the FSB Peer Group as of or for the LTM ended September 30, 2019 (unless otherwise noted) with pricing data as of December 18, 2019. The table below sets forth the data for FSB and the median, mean, low and high data for the FSB Peer Group.

FSB Comparable Company Analysis

 

     FSB      FSB
Peer Group
Median
     FSB
Peer Group
Mean
     FSB
Peer Group
Low
     FSB
Peer Group
High
 

Total assets ($mm)

     325        372        377        209        591  

Loans / Deposits (%)

     119.6        92.1        90.4        56.9        107.7  

Non-performing assets¹ / Total assets (%)

     0.32        0.85        0.93        0.00        2.24  

Tangible common equity/Tangible assets (%)

     9.83        10.84        14.13        9.33        27.91  

Tier 1 Leverage Ratio (%)

     9.13²        10.43        12.31        8.61        18.87  

Total RBC Ratio (%)

     16.53²        16.95        19.69        12.56        33.44  

CRE / Total RBC Ratio (%)

     91.8²        154.2²        191.1²        16.3²        491.6²  

LTM Return on average assets (%)

     0.00        0.69        0.66        0.09        1.11  

LTM Return on average equity (%)

     0.02        4.74        5.52        0.72        11.32  

LTM Net interest margin (%)

     2.64        3.65        3.42        2.07        4.38  

LTM Efficiency ratio (%)

     97.21        70.27        71.62        48.97        87.39  

Price/Tangible book value (%)

     102        109        108        85        133  

Price/LTM Earnings per share (x)

     NM        13.1        14.7        10.1        22.1  

Current Dividend Yield (%)

     0.0        0.6        0.9        0.0        2.5  

Market value ($mm)

     32        45        48        29        76  

 

1

Nonperforming assets defined as nonaccrual loans and leases, renegotiated loans and leases, and foreclosed or repossessed assets

2

Bank level financial data used where holding company data unavailable

 

74


Table of Contents

Sandler O’Neill used publicly available information to perform a similar analysis for Evans by comparing selected financial information for Evans with a group of financial institutions selected by Sandler O’Neill. The Evans peer group included major exchange-traded (Nasdaq, NYSE, NYSEAM) banks and thrifts headquartered in the Mid-Atlantic region with total assets between $1.25 billion and $1.75 billion, but excluded targets of announced merger transactions, or the Evans Peer Group. The Evans Peer Group consisted of the following companies:

 

1st Constitution Bancorp

  

Malvern Bancorp, Inc.

ACNB Corporation

  

Parke Bancorp, Inc.

Bank of Princeton

  

PCSB Financial Corporation

Capital Bancorp, Inc.

  

Penns Woods Bancorp, Inc.

CB Financial Services, Inc.

  

Prudential Bancorp, Inc.

Citizens & Northern Corporation

  

Shore Bancshares, Inc.

First United Corporation

  

Unity Bancorp, Inc.

Franklin Financial Services Corporation

  

The analysis compared publicly available financial information for Evans with corresponding data for the Evans Peer Group as of or for the LTM ended September 30, 2019 (unless otherwise noted) with pricing data as of December 18, 2019. The table below sets forth the data for Evans and the median, mean, low and high data for the Evans Peer Group.

Evans Comparable Company Analysis

 

     Evans      Evans
Peer Group
Median
     Evans
Peer Group
Mean
     Evans
Peer Group
Low
     Evans
Peer Group
High
 

Total assets ($mm)

     1,456        1,441        1,480        1,265        1,736  

Loans / Deposits (%)

     96.9        94.8        94.8        79.3        106.7  

Non-performing assets¹ / Total assets (%)

     1.26²        0.96        0.98        0.40        1.79  

Tangible common equity/Tangible assets (%)

     9.16        9.75        10.58        8.28        16.65  

Tier 1 Leverage Ratio (%)

     10.11        10.89        10.98        8.09        13.31  

Total RBC Ratio (%)

     13.11        15.42        15.50        11.55        20.77  

CRE / Total RBC Ratio (%)

     368.3²        244.8        258.0        141.5        380.5  

LTM Return on average assets (%)

     1.23        1.14        1.17        0.57        1.97  

LTM Return on average equity (%)

     13.03        10.48        10.65        3.11        18.25  

LTM Net interest margin (%)

     3.79        3.69        3.62        2.19        5.64  

LTM Efficiency ratio (%)

     67.86        60.29        59.94        28.79        73.40  

Price/Tangible book value (%)

     151        149        147        118        176  

Price/LTM Earnings per share (x)

     11.4        13.6        13.8        9.1        20.6  

Price/2020 Estimated Earnings per share (x)

     11.0        14.1        15.9        10.9        34.3  

Current Dividend Yield (%)

     2.6        2.1        2.0        0.0        4.0  

Market value ($mm)

     199        219        229        161        368  

 

1

Nonperforming assets defined as nonaccrual loans and leases, renegotiated loans and leases, and foreclosed or repossessed assets

2

Bank level financial data used where holding company data unavailable

Analysis of Precedent Transactions.

Sandler O’Neill reviewed a group of historical merger and acquisition transactions. The group consisted of bank and thrift transactions involving targets headquartered in the Mid-Atlantic and Northeast regions announced between January 1, 2016 and December 18, 2019 with target total assets between $100 million and $1 billion and LTM return on average assets less than 0.10%, but excluded deals with undisclosed deal values, or the Regional Precedent Transactions.

 

75


Table of Contents

The Regional Precedent Transactions group was composed of the following transactions:

 

Acquiror

  

Target

Orrstown Financial Services, Inc.

  

Hamilton Bancorp, Inc.

Hanover Bancorp Inc.

  

Chinatown Federal Savings Bank

ConnectOne Bancorp, Inc.

  

Greater Hudson Bank

Salem Five Bancorp

  

Sage Bank

1st Constitution Bancorp

  

New Jersey Community Bank

Bangor Bancorp, MHC

  

First Colebrook Bancorp, Inc.

Howard Bancorp, Inc.

  

1st Mariner Bank

Meridian Bancorp, Inc.

  

Meetinghouse Bancorp, Inc.

BCB Bancorp, Inc.

  

IA Bancorp, Inc.

Wallkill Valley Federal Savings and Loan Association

  

Hometown Bancorp, Inc. (MHC)

Prudential Bancorp, Inc.

  

Polonia Bancorp, Inc.

Using the latest publicly available information prior to the announcement of the relevant transaction, Sandler O’Neill reviewed the following transaction metrics: transaction price to tangible book value per share, core deposit premium, and 1-day market premium. Sandler O’Neill compared the indicated transaction metrics for the merger to the median, mean, low and high metrics of the Regional Precedent Transactions group.

 

    

 

     Regional Precedent
Transactions
 
     Evans /
FSB
     Median      Mean      Low      High  

Transaction Price / Tangible Book Value Per Share (%)

     108        116        123        82        185  

Tangible Book Value Premium to Core Deposits (%)

     1.8 / 1.4¹        4.3        6.0        0.2        14.3  

1-Day Market Premium (%)

     6.1        16.7        32.5        5.6        97.4  

 

1

1.8% when core deposits equal to total deposits less CDs > $100,000 and 1.4% when core deposits equal to total deposits less CDs > $250,000

Net Present Value Analyses.

Sandler O’Neill performed an analysis that estimated the net present value of a share of FSB common stock assuming FSB performed in accordance with certain internal financial projections for FSB for the years ending December 31, 2019 through December 31, 2020, as well as estimated long-term annual balance sheet and net income growth rates for the years ending December 31, 2021 through December 31, 2023, as provided by the senior management of FSB. To approximate the terminal value of a share of FSB common stock at December 31, 2023, Sandler O’Neill applied price to 2023 earnings multiples ranging from 11.0x to 16.0x and multiples of 2023 tangible book value ranging from 100% to 125%. The terminal values were then discounted to present values using different discount rates ranging from 8.0% to 13.0%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of FSB common stock. As illustrated in the following tables, the analysis indicated an imputed range of values per share of FSB common stock of $1.17 to $2.06 when applying multiples of earnings and $10.22 to $15.48 when applying multiples of tangible book value.

 

76


Table of Contents

Earnings Per Share Multiples

 

Discount

Rate

   

11.0x

   

12.0x

   

13.0x

   

14.0x

    

15.0x

    

16.0x

 
  8.0   $ 1.41     $ 1.54     $ 1.67     $ 1.80      $ 1.93      $ 2.06  
  9.0   $ 1.36     $ 1.48     $ 1.61     $ 1.73      $ 1.85      $ 1.98  
  10.0   $ 1.31     $ 1.43     $ 1.54     $ 1.66      $ 1.78      $ 1.90  
  11.0   $ 1.26     $ 1.37     $ 1.49     $ 1.60      $ 1.71      $ 1.83  
  12.0   $ 1.21     $ 1.32     $ 1.43     $ 1.54      $ 1.65      $ 1.76  
  13.0   $ 1.17     $ 1.27     $ 1.38     $ 1.48      $ 1.59      $ 1.70  

Tangible Book Value Per Share Multiples

 

Discount

Rate

   

100%

   

105%

   

110%

   

115%

    

120%

    

125%

 
  8.0   $ 12.38     $ 13.00     $ 13.62     $ 14.24      $ 14.86      $ 15.48  
  9.0   $ 11.91     $ 12.50     $ 13.10     $ 13.69      $ 14.29      $ 14.89  
  10.0   $ 11.45     $ 12.03     $ 12.60     $ 13.17      $ 13.75      $ 14.32  
  11.0   $ 11.02     $ 11.57     $ 12.13     $ 12.68      $ 13.23      $ 13.78  
  12.0   $ 10.61     $ 11.14     $ 11.67     $ 12.20      $ 12.73      $ 13.26  
  13.0   $ 10.22     $ 10.73     $ 11.24     $ 11.75      $ 12.26      $ 12.77  

Sandler O’Neill also considered and discussed with the FSB board of directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to earnings. To illustrate this impact, Sandler O’Neill performed a similar analysis, assuming FSB’s earnings varied from 15.0% above projections to 15.0% below projections. This analysis resulted in the following range of per share values for FSB common stock, applying the price to 2023 earnings multiples range of 11.0x to 16.0x referred to above and a discount rate of 12.99%.

Earnings Per Share Multiples

 

Annual

Estimate

Variance

   

11.0x

   

12.0x

   

13.0x

   

14.0x

    

15.0x

    

16.0x

 
  (15.0 %)    $ 0.99     $ 1.08     $ 1.17     $ 1.26      $ 1.35      $ 1.44  
  (10.0 %)    $ 1.05     $ 1.14     $ 1.24     $ 1.34      $ 1.43      $ 1.53  
  (5.0 %)    $ 1.11     $ 1.21     $ 1.31     $ 1.41      $ 1.51      $ 1.61  
  0.0   $ 1.17     $ 1.27     $ 1.38     $ 1.48      $ 1.59      $ 1.70  
  5.0   $ 1.22     $ 1.34     $ 1.45     $ 1.56      $ 1.67      $ 1.78  
  10.0   $ 1.28     $ 1.40     $ 1.52     $ 1.63      $ 1.75      $ 1.87  
  15.0   $ 1.34     $ 1.46     $ 1.58     $ 1.71      $ 1.83      $ 1.95  

Sandler O’Neill also performed an analysis that estimated the net present value per share of Evans common stock, assuming Evans performed in accordance with publicly available median analyst earnings per share estimates for Evans for the quarter ending December 31, 2019 and the year ending December 31, 2020, as well as estimated long-term annual balance sheet and earnings per share growth rates for the years ending December 31, 2021 through December 31, 2023 and estimated dividends per share for the years ending December 31, 2020 through December 31, 2023. To approximate the terminal value of a share of Evans common stock at December 31, 2023, Sandler O’Neill applied price to 2023 earnings multiples ranging from 9.5x to 19.5x and multiples of 2023 tangible book value ranging from 125% to 175%. The terminal values were then discounted to present values using different discount rates ranging from 8.0% to 13.0%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Evans common stock. As illustrated in the following tables, the analysis indicated an imputed

 

77


Table of Contents

range of values per share of Evans common stock of $30.60 to $72.11 when applying multiples of earnings and $33.62 to $55.33 when applying multiples of tangible book value.

Earnings Per Share Multiples

 

Discount

Rate

   

9.5x

   

11.5x

   

13.5x

   

15.5x

    

17.5x

    

19.5x

 
  8.0   $ 36.83     $ 43.89     $ 50.95     $ 58.00      $ 65.06      $ 72.11  
  9.0   $ 35.47     $ 42.25     $ 49.04     $ 55.82      $ 62.61      $ 69.39  
  10.0   $ 34.16     $ 40.69     $ 47.22     $ 53.74      $ 60.27      $ 66.79  
  11.0   $ 32.92     $ 39.20     $ 45.48     $ 51.76      $ 58.04      $ 64.32  
  12.0   $ 31.73     $ 37.78     $ 43.82     $ 49.87      $ 55.91      $ 61.96  
  13.0   $ 30.60     $ 36.42     $ 42.24     $ 48.06      $ 53.88      $ 59.70  

Tangible Book Value Per Share Multiples

 

Discount

Rate

   

125%

   

135%

   

145%

   

155%

    

165%

    

175%

 
  8.0   $ 40.49     $ 43.46     $ 46.43     $ 49.40      $ 52.37      $ 55.33  
  9.0   $ 38.98     $ 41.84     $ 44.69     $ 47.55      $ 50.40      $ 53.26  
  10.0   $ 37.55     $ 40.29     $ 43.04     $ 45.78      $ 48.53      $ 51.28  
  11.0   $ 36.18     $ 38.82     $ 41.46     $ 44.10      $ 46.75      $ 49.39  
  12.0   $ 34.87     $ 37.41     $ 39.95     $ 42.50      $ 45.04      $ 47.59  
  13.0   $ 33.62     $ 36.07     $ 38.52     $ 40.97      $ 43.42      $ 45.86  

Sandler O’Neill also considered and discussed with the FSB board of directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to earnings. To illustrate this impact, Sandler O’Neill performed a similar analysis assuming Evans earnings varied from 15.0% above estimates to 15.0% below estimates. This analysis resulted in the following range of per share values for Evans common stock, applying the price to 2023 earnings multiples range of 9.5x to 19.5x referred to above and a discount rate of 12.99%.

Earnings Per Share Multiples

 

Annual

Estimate

Variance

   

9.5x

   

11.5x

   

13.5x

   

15.5x

    

17.5x

    

19.5x

 
  (15.0 %)    $ 26.46     $ 31.41     $ 36.36     $ 41.31      $ 46.26      $ 51.21  
  (10.0 %)    $ 27.84     $ 33.08     $ 38.33     $ 43.57      $ 48.81      $ 54.05  
  (5.0 %)    $ 29.23     $ 34.76     $ 40.29     $ 45.82      $ 51.35      $ 56.89  
  0.0   $ 30.61     $ 36.43     $ 42.26     $ 48.08      $ 53.90      $ 59.73  
  5.0   $ 31.99     $ 38.11     $ 44.22     $ 50.34      $ 56.45      $ 62.56  
  10.0   $ 33.38     $ 39.78     $ 46.19     $ 52.59      $ 59.00      $ 65.40  
  15.0   $ 34.76     $ 41.46     $ 48.15     $ 54.85      $ 61.55      $ 68.24  

Sandler O’Neill noted that the net present value analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

 

78


Table of Contents

Pro Forma Merger Analysis.

Sandler O’Neill analyzed certain potential pro forma effects of the transaction on Evans assuming the transaction closes at the end of the first calendar quarter of 2020. In performing this analysis, Sandler O’Neill utilized certain assumptions relating to purchase accounting adjustments, transaction expenses and cost savings, as well as an estimated long-term annual balance sheet growth rate for FSB for the years ending December 31, 2020 through December 31, 2023 and estimated annual return on average assets for FSB for the years ending December 31, 2021 through December 31, 2023. The analysis indicated that the transaction could be accretive to Evans estimated earnings per share (excluding one-time transaction costs and expenses) in the years ending December 31, 2020 through December 31, 2023 and dilutive to Evans estimated tangible book value per share at close and at December 31, 2020, December 31, 2021, and December 31, 2022.

In connection with this analysis, Sandler O’Neill considered and discussed with the FSB board of directors how the analysis would be affected by changes in the underlying assumptions, including the impact of final purchase accounting adjustments determined at the closing of the transaction, and noted that the actual results achieved by the combined company may vary from projected results and the variations may be material.

Sandler O’Neill’s Relationship.

Sandler O’Neill is acting as FSB’s financial advisor in connection with the merger and will receive a fee for such services in an amount equal to 1.25% of the aggregate merger consideration, which advisory fee is contingent upon the closing of the merger. At the time of announcement of the merger Sandler O’Neill’s fee was approximately $435,000. Sandler O’Neill also received a $75,000 fee from FSB upon rendering Sandler O’Neill’s opinion, which opinion fee will be credited in full towards any fee which will become payable to Sandler O’Neill upon closing of the transaction. FSB has also agreed to indemnify Sandler O’Neill against certain claims and liabilities arising out of Sandler O’Neill’s engagement and to reimburse Sandler O’Neill for certain of its out-of-pocket expenses incurred in connection with Sandler O’Neill’s engagement.

Sandler O’Neill did not provide any other investment banking services to FSB in the two years preceding the date of Sandler O’Neill’s opinion. Sandler O’Neill did not provide any investment banking services to Evans in the two years preceding the date of its opinion. In the ordinary course of Sandler O’Neill’s business as a broker-dealer, Sandler O’Neill may purchase securities from and sell securities to FSB, Evans and their respective affiliates. Sandler O’Neill may also actively trade the equity and debt securities of FSB, Evans and their respective affiliates for Sandler O’Neill’s account and for the accounts of Sandler O’Neill’s customers.

Additional Information Relating to Sandler O’Neill

On January 3, 2020, pursuant to the Agreement and Plans of Merger, dated as of July 9, 2019, by and among Piper Sandler Companies (formerly known as Piper Jaffray Companies), SOP Holdings, LLC and certain of its subsidiaries, including Sandler O’Neill, and the other parties thereto, Piper Sandler Companies completed its acquisition of one hundred percent of the outstanding ownership interests of Sandler O’Neill, or the Sandler Transaction. Effective as of the closing of the Sandler Transaction, Piper Sandler Companies’ wholly owned broker-dealer subsidiary Piper Jaffray & Co. changed its name to “Piper Sandler & Co.” References herein to “Sandler O’Neill” will include its successor “Piper Sandler & Co.” as the context requires.

Certain Unaudited Financial Projections Provided by FSB

FSB does not, as a matter of course, publicly disclose forecasts or internal projections as to future performance, earnings, or other results due to, among other reasons, the uncertainty of the underlying assumptions and estimates, the risk that they will prove incorrect and the inherent difficulty of accurately predicting financial performance for future periods. However, FSB is including in this proxy statement/prospectus certain non-public unaudited prospective financial information that was made available by FSB in connection with the mergers as described below and that were

 

79


Table of Contents

considered by Sandler O’Neill in preparing its fairness opinion to the FSB board of directors, as described in this proxy statement/prospectus under the heading “The Merger AgreementOpinion of FSB’s Financial Advisor.” The inclusion of this information should not be regarded as an indication that any of FSB, Evans or Sandler O’Neill, their respective representatives or any other recipient of this information considered, or now considers, it to be necessarily predictive of actual future results, or that it should be construed as financial guidance, and it should not be relied on as such. The FSB unaudited prospective financial information was prepared solely by FSB management and was not prepared or approved by Evans management or the Evans board of directors and Evans management and the Evans board of directors assume no responsibility for the unaudited prospective financial information.

This non-public unaudited prospective financial information was not prepared with a view toward public disclosure, nor was it prepared with a view toward compliance with GAAP, the prevailing practices in the banking industry, published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. In addition, the unaudited prospective financial information requires significant estimates and assumptions that make it inherently less comparable to the similarly titled GAAP measures in FSB’s or Evans’ historical GAAP financial statements. Neither Evans’ nor FSB’s independent public accountants nor any other independent accountants, have compiled, examined or performed any procedures with respect to the unaudited prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability. The independent registered public accountant reports included in this proxy statement/prospectus relate to historical financial information of each of FSB and Evans. They do not extend to the unaudited prospective financial information and should not be read to do so.

This information was prepared solely by FSB management for internal use and is subjective in many respects. Although presented with numeric specificity, the unaudited prospective financial information reflect numerous estimates and assumptions of FSB’s management made at the time they were prepared, and assume execution of various strategic initiatives that FSB is no longer pursuing in light of the mergers. These and the other estimates and assumptions underlying the unaudited prospective financial information involve judgments with respect to, among other things, the future interest rate environment and other economic, competitive, regulatory, and financial market conditions and future business decisions that may not be realized and that are inherently subject to significant business, economic, competitive, and regulatory uncertainties and contingencies, including, among other things, the inherent uncertainty of the business and economic conditions affecting the industry in which FSB and Evans operate, and the risks and uncertainties described under “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements,” all of which are difficult to predict and many of which are outside the control of FSB and Evans and will be beyond the control of the combined company. In addition, since the unaudited prospective financial information covers multiple years, such information by its nature becomes subject to greater uncertainty with each successive year. There can be no assurance that the underlying assumptions would prove to be accurate or that the projected results would be realized, and actual results likely would differ materially from those reflected in the unaudited prospective financial information, whether or not the merger is completed. Further, these assumptions and the unaudited prospective financial information may otherwise be affected by FSB’s ability to achieve its strategic goals, objectives and targets over the applicable periods and do not include all potential actions that management could or might have taken during these time periods.

The financial forecasts summarized in this section were prepared by and are the responsibility of the management of FSB. No independent registered public accounting firm, including for the avoidance of doubt FSB’s and Evans’ independent registered public accounting firm, has examined, compiled, or otherwise performed any procedures with respect to the prospective financial information contained in these financial forecasts and, accordingly, no independent registered public accounting firm has expressed any opinion or given any other form of assurance with respect to such information or its achievability and no independent registered public accounting firm assumes any responsibility for the financial forecasts.

 

80


Table of Contents

Furthermore, the financial forecasts do not take into account any circumstances or events occurring after the date they were prepared.

In light of the foregoing, and taking into account that the FSB special meeting will be held several months after the unaudited financial forecasts were prepared, as well as the uncertainties inherent in any forecasted information, FSB stockholders are strongly cautioned not to place unwarranted reliance on such information, and FSB and Evans urge all FSB stockholders to review FSB’s and Evans’ financial statements and other information contained elsewhere in this proxy statement/prospectus for a description of FSB’s and Evans’ respective business and reported results. See the section entitled “Where You Can Find More Information.” Please see the full text of Sandler O’Neill’s opinion, which is attached as Annex C hereto, respectively, for more details about the information that Sandler O’Neill relied on in rendering its opinion.

The following tables present select unaudited prospective financial information of FSB on a stand-alone basis, that were prepared solely by FSB’s management, and provided to Sandler O’Neill:

 

     At or For the Year
Ended December 31,
 
     2019      2020  
     (In thousands)  

Total assets

   $ 333,382      $ 368,325  

Gross Loans

     288,889        323,169  

Total deposits

     240,968        266,598  

Net income (loss)

     (97      258  

 

     Assumed Long-Term
Growth Rates
 

Balance Sheet (%)

     8

Net Income (%)

     10

The following table shows the pro forma financial impact of the merger on Evans used by Sandler O’Neill: